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Exam 22: S Corporations

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Question 31

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Stock basis first is increased by income items, then by distributions, and finally decreased by ____________________.

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Question 32

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An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

A) $0.
B) $40,923.
C) $116,923.
D) $136,500.

E) All of the above
F) B) and D)

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Question 33

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Only 51% of the shareholders must consent to an S election.

Shareholders owning a(n) of shares (voting and nonvoting) may ____________________ revoke an election.

S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis).

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

With respect to passive losses, there are three classes of income, losses, and credits: , ____________________, and passive.

An S shareholder's stock basis is reduced by flow­through losses before accounting for distributions.

For a new corporation, a premature S election may not be effective.

Which tax provision does not apply to an S corporation?

Which of the following reduces a shareholder's S corporation stock basis?

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

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, 2014, Samantha sells all of her Evita stock. Her basis at the beginning of 2014 was $60,000. Her share of the corporate income for 2014 was $22,000, and she receives a distribution of $35,000 between January 1 and October 11, 2014. Her stock basis at the time of the sale is:

Since loss property receives a in basis without any loss recognition, S corporation distributions of loss property should be .

Non­separately computed loss a S shareholder's stock basis.

Which could constitute a second class of stock?

During 2014, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2013, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

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

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:

Explain the OAA concept.