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Exam 22: S Corporations

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Question 71

True/False

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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.

A) True
B) False

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Question 72

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Claude Bergeron sold 1,000 shares of Ditta,Inc. ,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

A) No gain or loss.
B) $50,000 LTCL;$49,000 ordinary deduction.
C) $50,000 ordinary deduction;$49,000 LTCL.
D) $99,000 long-term capital loss.

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

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Question 73

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An S corporation cannot incur a tax liability at the corporation level.

Beginning in 2015,the AAA of Amit,Inc. ,an S corporation,has a balance of $614,000.During the year,the following items occur. Operating income $501,000 Interest income 6,500 Dividend income 13,020 Municipal bond interest income 6,000 Long-term capital loss from sale of investment land 7,400 Section 179 depreciation deduction 6,000 Charitable contributions 19,000 Cash distributions 57,000 ​ Amit's ending AAA balance is:

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

A calendar year C corporation reports a $41,000 NOL in 2014,but it elects S status for 2015 and generates an NOL of $30,000 in that year.At all times during 2015,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 2015.How much of the 2015 loss,if any,is deductible by Kris?

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

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

Arizona is a(n) ____________________ property state for purposes of the S corporation requirements.

All tax preference items flow through the S corporation,to be included in the shareholders' AMT calculations.

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

Identify a disadvantage of being an S corporation.

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.

You are given the following facts about a solely owned S corporation.What is the shareholder's ending stock basis? Increase in AAA $31,000 Increase in OAA 6,300 Payroll tax penalty 2,140 Beginning stock basis 39,800 Stock purchases 22,000 Tax-exempt insurance proceeds 4,800 Insurance premiums paid (nondeductible) 2,700 ​

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

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

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

An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000.The company carries an $8,000 NOL carryforward from a C corporation year,and a $7,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

What statement is correct with respect to an S corporation?

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