Question 1

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2019, the date the S election is made.
  
During the year, 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.

Accepted Answer

$123,900. The net unrealized built-in ga...

Question 2

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Accepted Answer

A) True 
 B)False

Question 3

What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

Accepted Answer

A)   Any method agreed to by all of the shareholders.
B)   Per-day allocation.
C)   FIFO method.
D)   LIFO method.E) None of the above
F) A) and B)

Question 4

Which type of distribution from an S corporation is taxed at ordinary income rates?

Accepted Answer

A)   AAA.
B)   OAA
C)   AEP
D)   None of the above items is taxed as ordinary income.E) A) and B)
F) C) and D)

Question 5

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) :

Accepted Answer

A)   Ordinary income of $115,000 and long-term capital gain of $5,000
B)   Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.
C)   Ordinary income of $120,000.
D)   Capital gain of $120,000.E) A) and D)
F) None of the above

Question 6

Form 1120S provides an S shareholder's computation of his or her stock basis.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

A one person LLC can be a shareholder of an S corporation.

Accepted Answer

A) True 
 B)False

Question 9

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)   Operating income.
B)   Long-term capital gain.
C)   Cost of goods sold.
D)   Short-term capital loss.
E)   The 20% QBI deduction.F) C) and E)
G) B) and E)

Question 12

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Accepted Answer

A) True 
 B)False

Question 13

The passive investment income of an S corporation includes gains from the sale of securities.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   A partnership.
B)   A nonresident alien.
C)   A three-person LLC.
D)   The estate of a deceased shareholder.
E)   None of the above are eligible shareholders.F) B) and E)
G) A) and B)

Question 15

Depreciation recapture income is a Schedule K item on the Form 1120S.

Accepted Answer

A) True 
 B)False

Question 16

You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

Accepted Answer

A)   $71,600
B)   $74,120
C)   $76,220
D)   $78,920E) C) and D)
F) B) and D)

Question 17

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

Accepted Answer

A)   Intangible drilling costs.
B)   Foreign loss.
C)   Utilities expense.
D)   Recovery of a tax benefit.
E)   All of the above items appear on Schedule K.F) C) and D)
G) B) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

An estate may be a shareholder of an S corporation.

Accepted Answer

A) True 
 B)False

Question 20

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Accepted Answer

A) True 
 B)False

Exam 22: S Corporations

Correct Answer
verified
$123,900. The net unrealized built-in ga...
View Answer

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Correct Answer
verified

The passive investment income of an S corporation includes gains from the sale of securities.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

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) :

Correct Answer
verified

An estate may be a shareholder of an S corporation.

Correct Answer
verified

What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

Correct Answer
verified

You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

Correct Answer
verified

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Correct Answer
verified

Which type of distribution from an S corporation is taxed at ordinary income rates?

Correct Answer
verified

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Correct Answer
verified

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

Correct Answer
verified

Form 1120S provides an S shareholder's computation of his or her stock basis.

Correct Answer
verified

Depreciation recapture income is a Schedule K item on the Form 1120S.

Correct Answer
verified

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Correct Answer
verified

A one person LLC can be a shareholder of an S corporation.

Correct Answer
verified

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

Correct Answer
verified

Exam 22: S Corporations

Correct Answerverified$123,900. The net unrealized built-in ga...View AnswerShow Answer

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Correct AnswerverifiedShow Answer

The passive investment income of an S corporation includes gains from the sale of securities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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) :

Correct AnswerverifiedShow Answer

An estate may be a shareholder of an S corporation.

Correct AnswerverifiedShow Answer

What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

Correct AnswerverifiedShow Answer

You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

Correct AnswerverifiedShow Answer

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

Correct AnswerverifiedShow Answer

Which type of distribution from an S corporation is taxed at ordinary income rates?

Correct AnswerverifiedShow Answer

An item that appears in the "Other Adjustments Account" affects stock basis, but not AAA, such as tax-exempt interest.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Form 1120S provides an S shareholder's computation of his or her stock basis.

Correct AnswerverifiedShow Answer

Depreciation recapture income is a Schedule K item on the Form 1120S.

Correct AnswerverifiedShow Answer

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Correct AnswerverifiedShow Answer

A one person LLC can be a shareholder of an S corporation.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
$123,900. The net unrealized built-in ga...
View Answer

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