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Exam 15: S Corporations

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Question 51

True/False

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Distributions of appreciated property by an S corporation are not taxable to the entity.

A) True
B) False

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Question 52

Multiple Choice

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When an S corporation liquidates, which of its tax attributes disappear?

A) AAA.
B) AEP.
C) Suspended losses.
D) All of the above items disappear.

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

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Question 53

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An S corporation's separately stated items generally are identical to those separately stated by _________________________.

Estella, Inc., a calendar year S corporation, incurred the following items during the tax year. ​ Calculate Estella's nonseparately computed income.

Identify a disadvantage of being an S corporation.

Discuss two ways that an S election may be terminated.

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

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

Towne, Inc., a calendar year S corporation, holds AAA of $627,050 at the beginning of the tax year. During the year, the following items occur. ​ Calculate Towne's ending AAA balance.

If an S corporation has C corporation E & P and passive investment income in excess of ____________________ % of its gross receipts for ____________________ consecutive taxable years, the S election is terminated at the beginning of the ____________________ year.

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

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2016, the date the S election is made. ​ During 2016, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax.

What statement is correct with respect to an S corporation?

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

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:

Chris, the sole shareholder of Taylor, Inc., elects during 2016 to terminate the S election, effective January 1, 2017. As of the end of 2016, Taylor, Inc., holds AAA of $120,000 and OAA of $13,000. Chris receives a cash distribution of $130,000 on January 15, 2017. If his stock basis is $220,000 before the distribution, calculate Chris's taxable amount and his ending stock basis.

An S corporation recognizes a ____________________ on any distribution of appreciated property.

An S shareholder's basis is increased by stock purchases and capital contributions.

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.

An S corporation cannot be a shareholder in another corporation.