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Exam 12: S Corporations

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Question 61

True/False

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A newly formed S corporation does not receive any tax benefit from an NOL incurred in its first tax year.

A) True
B) False

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Question 62

Multiple Choice

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Claude Bergeron sold 1,000 shares of Ditta, Inc., an S corporation, for $12,000. He had owned the stock for three years and had a stock basis of $111,000 in the shares. Claude is single, and he is the original owner of the § 1244 stock shares. Calculate the appropriate tax treatment.

A) No gain or loss.
B) $50,000 LTCL; $49,000 ordinary deduction.
C) $50,000 ordinary deduction; $49,000 LTCL.
D) $99,000 long-term capital loss.

E) None of the above
F) B) and D)

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Question 63

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Gene Grams is a 45% owner of a calendar year S corporation during 2015. His beginning stock basis is $230,000, and the S corporation reports the following items. ​ Calculate Grams's stock basis at year-end.

Distribution of loss property by an S corporation to a shareholder generally should be _________________.

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

What statement is correct with respect to an S corporation?

The amount of any distribution to an S corporation shareholder is equal to the ____________________ plus the fair market value of any other property distributed.

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Identify a disadvantage of being an S corporation.

Most limited liability partnerships can own stock in an S corporation.

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Several individuals acquire assets on behalf of Skip Corporation on May 28, 2015, purchased assets on June 3, 2015, and began business on June 11, 2015. They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2015. The S election must be filed no later than 2 1/2 months after:

Chris, the sole shareholder of Taylor, Inc., elects during 2015 to terminate the S election, effective January 1, 2016. As of the end of 2015, Taylor, Inc., holds AAA of $120,000 and OAA of $13,000. Chris receives a cash distribution of $130,000 on January 15, 2016. If his stock basis is $220,000 before the distribution, calculate Chris's taxable amount and his ending stock basis.

An S corporation may not amortize its organization expenses.

Which item does not appear on Schedule K of Form 1120S?

A calendar year C corporation reports a $41,000 NOL in 2014, but it elects S status for 2015 and generates an NOL of $30,000 in that year. At all times during 2015, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, holds an S stock basis of $2,300 at the beginning of 2015. How much of the 2015 loss, if any, is deductible by Kris?

The passive investment income of an S corporation includes gains from the sale of securities.

An S corporation cannot incur a tax liability at the corporation level.

Pepper, Inc., an S corporation, holds a $1 million balance in accumulated E&P. It reports sales revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. What is Pepper's passive income penalty tax payable, if any?

Which statement is incorrect?