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Exam 12: S Corporations

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Question 61

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A capital loss allocated to a shareholder always reduces the accumulated adjustments account.

A) True
B) False

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Question 62

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Your client is a C corporation that wishes to convert to S status.Advise this corporation with respect to minimizing any § 1374 built-in gains tax.

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The C corporation should obtain sound ap...

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Question 63

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An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss)up to the date of death on the final individual tax return.

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

A shareholder's basis is decreased by stock purchases.

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

Edwards,Inc.,an S corporation,distributes a machine to Mary,a majority shareholder.This asset has an adjusted basis of $30,000,but a fair market value of $80,000.Accumulated cost recovery deductions amount to $25,000.Edwards recognizes a gain of:

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

Several individuals acquire assets on behalf of Skip Corporation on May 29,2008,purchased assets on June 3,and begin doing business on June 11,2008.They subscribe to shares of stock,file articles of incorporation for Skip,and become shareholders on June 21,2008.The S election must be filed no later than 2 1/2 months after:

________________ members are counted as one S corporation shareholder.

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.

Shareholders owning a(n)____________________ of shares (voting and nonvoting)may _________________________ revoke an election.

Lott Corporation in Macon,Georgia converts to S corporation status in 2008.Lott used the LIFO inventory method in 2007 and had a LIFO inventory of $420,000 (FIFO value of $550,000) .How much tax must be added to the 2007 corporate tax liability,assuming that Lott is subject to a 35% tax rate.

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

Passive investment income includes gains from the sale of securities.

An S corporation is limited to a theoretical maximum of ______________ shareholders.

A termination occurs on the day that a corporation ____________________ to be an S corporation.

Beginning in 2008,the AAA of Amit,Inc.,an S corporation,has a balance of $782,000.During the year,the following items occur. Amit's ending AAA balance is:

Most IRAs can own stock in an S corporation.

An S corporation recognizes a loss when distributing assets that are worth less than their basis.