FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: S Corporations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

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?

A) $380,000.
B) $185,000.
C) $40,895.
D) ​$0.

E) B) and C)
F) B) and D)

Correct Answer

verified

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

​A former spouse is treated as being in the same family as the individual to whom he or she was married, for purposes of determining the number of S corporation shareholders.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

Essay

Review LaterAdd Note

You are a 60% owner of an S corporation.Calculate your ending stock basis, based upon these facts. $\begin{array} { l r } \text { Beginning stock basis } & \$ 52,600 \\\text { Purchases of additional stock } & 15,000 \\\text { Insurance premiums paid (nondeductible) } & 3,600 \\\text { Tax-exempt interest income } & 5,230 \\\text { Payroll tax penalty } & 3,770 \\\text { Increase in AAA } & 22,400 \\\text { Increase in OAA } & 5,800\end{array}$

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

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. $\begin{array} { l r } \text { Sales income } & \$ 216,000 \\\text { Loss from real estate operations } & ( 4,000 ) \\\text { Officers' life insurance proceeds } & 100,000 \\\text { Premiums paid for officers' life insurance } & ( 3,600 ) \\\text { Dividend income } & 17,000 \\\text { Interest income } & 3,000 \\\text { Charitable contributions } & ( 22,000 ) \\\S 179 \text { depreciation expense } & ( 2,500 ) \\\text { Administrative expenses } & ( 35,000 ) \\\text { Cash distributions to shareholders } & ( 73,220 )\end{array}$ ​ Calculate Towne's ending AAA balance.

Liabilities affect the owner's basis differently in an S corporation than they do in a partnership.

Discuss two ways that an S election may be terminated.

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

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

Mock Corporation converts to S corporation status in 2018.Mock used the LIFO inventory method in 2017 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 2017 corporate tax liability, assuming that Mock is subject to a 35% tax rate.

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

Compensation for services rendered to an S corporation is subject to FICA taxes.

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

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

Some ____________________and ?________taxation rules apply to an S corporation.

​The AAA begins with a zero balance on the first day of an S corporation's first tax year.

A new S corporation shareholder can revoke the S election unilaterally, if he/she owns how much of the existing S corporation's stock?

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

A calendar year C corporation reports a $41,000 NOL in 2017, but it elects S status for 2018 and generates an NOL of $30,000 in that year.At all times during 2018, 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 2018.How much of the 2018 loss, if any, is deductible by Kris?

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