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Exam 15: S Corporations

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Question 31

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A calendar year C corporation reports a $41,000 NOL in 2018, but it elects S status for 2019 and generates an NOL of $30,000 in that year.At all times during 2019, 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 2019.How much of the 2019 loss, if any, is deductible by Kris?

A) $0
B) $2,300
C) $3,000
D) $7,100

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

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Question 32

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A per-day, per-share allocation of flow-through S corporation items must be used.

A) True
B) False

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Question 33

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

Separately stated items are listed on Schedule of the Form 1120S.

The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.

Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA at the beginning of the calendar tax year.Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock.Kinney's taxable income is $6,000 for the year.Kinney distributes $6,000 to each shareholder on February 1, and it distributes another $3,000 to each shareholder on September 1.How is Eric taxed on the distribution?

Mock Corporation converts to S corporation status in 2019.Mock used the LIFO inventory method in 2018 and had a LIFO inventory of $435,000 FIFO value of $550,000) on the date of the S election.How much tax must be added to Mock's 2018 corporate tax liability, assuming that Mock is subject to a 21% tax rate.

There are no advantages for an S corporation to issue § 1244 stock.

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

An estate may be a shareholder of an S corporation.

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the value.

A corporation may alternate between S corporation and C corporation status each year, depending on which results in more tax savings.

Lemon Corporation incurs the following transactions. Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty.As a result, Patty must recognize ignore the 20% QBI deduction) :

At the beginning of the year, the AAA of Rose, Inc.shows a balance of $682,000.During the year, the following items occur.Compute the end-of-year AAA balance.

Which item has no effect on an S corporation's AAA?

An S corporation must possess which of the following characteristics?

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

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

Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

If any entity electing S status is currently a C corporation, NOL carryovers from prior years generally be used in an S corporation year.