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Exam 12: S Corporations

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Question 71

Multiple Choice

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Which of the following reduces a shareholder's S corporation stock basis?

A) Depletion deductions in excess of the basis of property.
B) Illegal kickbacks paid.
C) Nontaxable income.
D) Sales.

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

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Question 72

Multiple Choice

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Which item is not included in an S corporation's nonseparately computed income?

A) Net sales.
B) Cost of goods sold.
C) Dividends received.
D) Depreciation recapture.

E) A) and D)
F) A) and C)

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Question 73

True/False

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An S shareholder's stock basis can be reduced below zero.

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

If a resident alien shareholder moves outside the U.S., the S election is terminated.

An S corporation with substantial AEP records operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

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

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

On January 2, 2014, Tim loans his S corporation $10,000. By the end of 2014, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company makes 2015 distributions to Tim of $8,000. Tim reports a(n) :

Post-termination distributions that are charged against OAA are received tax-free.

A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to S status 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.

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

If any entity electing S status is currently a C corporation, NOL carryovers from prior years ____________________ be used in an S corporation year.

A distribution from OAA is taxable.

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