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Exam 22: S: Corporations

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Question 1

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

A) True
B) False

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Question 2

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Net operating losses incurred before an S election do not flow through to the shareholders once the election is in effect.

A) True
B) False

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Question 3

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The § 1374 tax is a corporate-level tax on any built-in gain recognized in 2012 when an S corporation disposes of an asset in a taxable disposition within 10 tax years after the date on which the S election took effect.

Tax-exempt income is a Schedule K item for an S corporation.

Milke, Inc., an S corporation, has gross receipts of $190,000 and gross income of $170,000.Milke has AEP of $22,000 and ordinary income of $29,000.The company reports passive investment income of $100,000, with $40,000 of expenses directly related to the production of passive investment income.Calculate Milke's excess net passive income and any passive investment income penalty tax.

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

Most IRAs can own stock in an S corporation.

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

Which statement is incorrect about an S corporation?

A distribution from OAA is not taxable.

No maximum or minimum dollar sales or capitalization restrictions apply to S corporations.

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

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.

List some of the separately stated items listed on Schedule K of the Form 1120S.

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to an S corporation on February 14.By the end of the year, $60,000 of these receivables are collected.Calculate any built-in gains tax, assuming that there is sufficient taxable income.

Distribution of loss property by an S corporation to a shareholder generally should be _________________.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to the stock during a post-termination transition period of approximately one year is applied against and reduces the adjusted basis of the stock.

Which statement is incorrect with respect to an S shareholder's consent?

Separately stated items are listed on Schedule _________________________ of the Form 1120S.

Blue Corporation elects S status effective for tax year 2012. As of January 1, 2012, Blue's assets were appraised as follows. In each of the following situations, calculate any built-in gains tax, assuming that the highest corporate tax rate is 35%. C corporation taxable income would have been $100,000.