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Exam 12: S: Corporations

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Question 41

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A distribution from OAA is taxable.

A) True
B) False

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Question 42

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NOL carryovers from C years can be used in an S corporation year against ordinary income.

A) True
B) False

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Question 43

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

An S corporation is subject to the following tax.

Towne, Inc., a calendar year S corporation, holds AAA of $627,050 at the beginning of 2014. During the year, the following items occur. Sales income $216,000 Loss from real estate operations (4,000) Officers' life insurance proceeds 100,000 Premiums paid for officers' life insurance (3,600) Dividend income 17,000 Interest income 3,000 Charitable contributions (22,000) § 179 depreciation expense (2,500) Administrative expenses (35,000) Cash distributions to shareholders (73,220) Calculate Towne's ending AAA balance.

A calendar year C corporation reports a $41,000 NOL in 2013, but it elects S status for 2014 and generates an NOL of $30,000 in that year. At all times during 2014, 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 2014. How much of the 2014 loss, if any, is deductible by Kris?

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Yates Corporation elects S status, effective for calendar year 2014. Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1, 2014. The asset is sold at the end of 2014 for $130,800. What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

Which, if any, of the following can be eligible shareholders of an S corporation?

On December 31, 2014, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock. The basis of Erica's share is $300. During 2015, 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 2015.

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

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

Discuss the two methods of allocating tax-related items to S corporation shareholders.

If an S corporation shareholder's basis in a loan to the entity has been , the shareholder recognizes gross income when the S corporation repays the shareholder.

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

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

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

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

Persons who were S shareholders during any part of the year before the election date, but were not shareholders when the election was made, also must consent to an S election.