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Exam 12: S Corporations

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Question 31

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The choice of a flow-through entity for a closely held corporation often is between an)___________ a Federal tax entity) and an) ___________a state tax entity).

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Question 32

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Bidden, Inc., a calendar year S corporation, incurred the following items. $\begin{array}{lr}\text { Sales } & \$ 130,000 \\\text { Depreciation recapture income } & 12,000 \\\text { Short-term capital gain } & 30,000 \\\text { Cost of goods sold } & (42,000) \\\text { Municipal bond interest income } & 7,000 \\\text { Administrative expenses } & (15,000) \\\text { Depreciation expense } & (17,000) \\\text { Charitable contributions } & (14,000)\end{array}$ Calculate Bidden's nonseparately computed income.

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Question 33

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

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

An S corporation can claim a deduction for its operating loss amounts.

Compensation for services rendered to an S corporation generates a corporate-level FICA tax liability.

Explain the OAA concept.

Identify a disadvantage of being an S corporation.

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

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

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

Several individuals acquire assets on behalf of Skip Corporation on May 28, purchased assets on June 3 and began business on June 11. They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21. The S election must be filed no later than two and one-half months after:

Since loss property receives a_______ in basis without any loss recognition, S corporation distributions of loss property generally should be________ .

On December 31, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock. The basis of Erica's share is $300. The next year, the S corporation incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of the second year.

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

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

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

As with partnerships, the income, deductions, and tax credits of an S corporation__________ to the shareholders annually.

S corporation status allows shareholders to realize tax benefits from corporate losses immediately assuming sufficient stock basis).

Lemon Corporation incurs the following transactions. $\begin{array} { l c } \text { Net income from operations } & \$ 110,000 \\\text { Interest income from saving account } & 5,000 \\\text { Long-term capital gain from sale of securities } & 9,000 \\\text { Short-term capital loss from sale of securities } & 4,000\end{array}$ Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.