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Exam 15: S Corporations

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Question 61

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On January 1, Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight. The dirt company has a $60,000 loss for a non-leap year. On the 200th day of the year (not a leap year) , Bobby sells his one-half of the stock to his son, Saul. How much of the $60,000 loss, if any, is allocated to Bobby?

A) $0
B) $13,562
C) $16,438
D) $32,877

E) A) and B)
F) A) and C)

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Question 62

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

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In general, S corporation items are divi...

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Question 63

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An S corporation can claim a deduction for its NOL carryovers.

A two-or-more member ____________________ operates under ____________________ tax principles.

Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas. For this tax year, the basis in his stock is $30,000, before the adjustment for this year's losses. Randall's share of the corporation's ordinary loss is $20,000, and his share of its capital loss is $15,000. How much can Randall deduct due to these losses?

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

Post-termination distributions that are charged against OAA are received tax-free.

On December 31, 2016, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock. The basis of Erica's share is $300. During 2017, the S corporation incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of 2017.

Which could constitute a second class of stock?

A termination occurs on the day that a corporation ____________________ to be an S corporation.

As with partnerships, the income, deductions, and tax credits of an S corporation ____________________ to the shareholders annually.

Voting common stock and voting preferred stock (with a preference on dividends) would be treated as ____________________ class(es) of stock.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

The carryover period for the NOLs of a C corporation does not continue to run during S corporation years.

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

An S corporation that has total assets of at least $50 million on Schedule L at the end of the tax year must file a Schedule M-3.

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

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?

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.