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Exam 12: S Corporations

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Question 71

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Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

A) True
B) False

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Question 72

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A distribution from OAA is taxable.

A) True
B) False

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Question 73

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Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by this corporation.

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

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

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

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

Most IRAs cannot own stock in an S corporation.

Explain the OAA concept.

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

Tax-exempt income at the corporate level flows through as exempt to S shareholders.

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

An S corporation can claim a deduction for its NOL carryovers.

Stock basis first is increased by income items, then ____________________ by distributions, and finally decreased by ____________________.

The Schedule M-3 is the same for a C corporation and an S corporation.

On January 2, 2015, Tim loans his S corporation $10,000. By the end of 2015, Tim's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2016, the company's operating income is $10,000. The company makes 2016 distributions to Tim of $8,000. Tim reports a(n) :

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.

Yates Corporation elects S status, effective for calendar year 2016. Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1, 2016. The asset is sold at the end of 2016 for $130,800. What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

An S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

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