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Exam 15: S Corporations

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Question 31

Multiple Choice

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What statement is correct with respect to an S corporation?

A) There are now more LLCs than S corporations.
B) S corporation status allows shareholders immediately to realize tax benefits from corporate losses.
C) An S corporation is prohibited from being a member of an affiliated group.
D) An LLP may own stock in an S corporation.
E) None of the above statements is correct.

F) A) and B)
G) A) and C)

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Question 32

Multiple Choice

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An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000.The company carries an $8,000 NOL carryforward from a C corporation year,and a $7,000 business credit carryforward from a C corporation year.The built-in gains tax liability is:

A) $31,500.
B) $28,700.
C) $24,500.
D) $0.
E) Some other amount.

F) C) and D)
G) A) and B)

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Question 33

True/False

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

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

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

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

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

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

An S corporation cannot be a shareholder in another corporation.

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

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

Pepper,Inc. ,an S corporation,holds a $1 million balance in accumulated E&P.It reports sales revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's passive income penalty tax payable,if any?

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

A per-day,per-share allocation of flow-through S corporation items must be used,unless the shareholder disposes of the entire interest in the entity.

Several individuals acquire assets on behalf of Skip Corporation on May 28,2015,purchased assets on June 3,2015,and began business on June 11,2015.They subscribe to shares of stock,file articles of incorporation for Skip,and become shareholders on June 21,2015.The S election must be filed no later than 2 1/2 months after:

What statement is correct with respect to an S corporation?

Only 51% of the shareholders must consent to an S election.

Some ____________________ taxation rules apply to an S corporation.

A two-or-more member ____________________ operates under ____________________ tax principles.

Tax-exempt income is listed on Schedule ____________________ of Form 1120S.