Question 1

With respect to passive losses, there are three classes of income, losses, and credits: ____________________, ____________________, and passive.

Accepted Answer

active, po...

Question 2

Which corporation is eligible to make the S election?

Accepted Answer

A)   Non-U.S. corporation.
B)   Limited liability company.
C)   Insurance company.
D)   U.S. bank.
E)   None of the above can select S status.F) C) and D)
G) C) and E)

Question 3

Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

Accepted Answer

A)   Operating income.
B)   Long-term capital gain.
C)   Cost of goods sold.
D)   Short-term capital loss.
E)   All of the above affect stock basis.F) A) and D)
G) A) and E)

Question 4

Where the S corporation rules are silent, C corporation provisions apply.

Accepted Answer

A) True 
 B)False

Question 5

Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

Accepted Answer

A) True 
 B)False

Question 8

Bidden, Inc., a calendar year S corporation, incurred the following items.  
​
Calculate Bidden's nonseparately computed income.

Accepted Answer

The answer of Bidden, Inc., a calendar year S corporation,...

Question 9

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

Accepted Answer

A)   Payroll penalty.
B)   Unreasonable compensation.
C)   Life insurance proceeds (nontaxable to the recipient S corporation) .
D)   Taxable interest.
E)   None of the above affects the OAA.F) A) and B)
G) A) and E)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The carryover period for the NOLs of a C corporation does not continue to run during S corporation years.

Accepted Answer

A) True 
 B)False

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Compensation for services rendered to an S corporation is subject to FICA taxes.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

Accepted Answer

A) True 
 B)False

Question 17

Realized gain is recognized by an S corporation on its distribution of ____________________ property.

Accepted Answer

The answer of Realized gain is recognized by an S...

Question 18

It is not beneficial for an S corporation to issue § 1244 stock.

Accepted Answer

A) True 
 B)False

Question 19

An S shareholder's stock basis does not include a ratable share of S corporation liabilities.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

The answer of Stock basis first is increased by income...

Exam 12: S Corporations

An S shareholder's stock basis does not include a ratable share of S corporation liabilities.

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An S corporation does not recognize a loss when distributing assets that are worth less than their basis.

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Compensation for services rendered to an S corporation is subject to FICA taxes.

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Realized gain is recognized by an S corporation on its distribution of ____________________ property.

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

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Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

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

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Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder?

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Tax-exempt income at the S corporation level flows through as taxable to the shareholder.

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Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

Correct AnswerverifiedShow Answer

It is not beneficial for an S corporation to issue § 1244 stock.

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Bidden, Inc., a calendar year S corporation, incurred the following items. ​ Calculate Bidden's nonseparately computed income.

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

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The carryover period for the NOLs of a C corporation does not continue to run during S corporation years.

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Which corporation is eligible to make the S election?

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With respect to passive losses, there are three classes of income, losses, and credits: ____________________, ____________________, and passive.

Correct Answerverifiedactive, po...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Where the S corporation rules are silent, C corporation provisions apply.

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

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

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Bidden, Inc., a calendar year S corporation, incurred the following items. Calculate Bidden's nonseparately computed income.

Correct Answer
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With respect to passive losses, there are three classes of income, losses, and credits: , , and passive.

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active, po...
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