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Exam 15: S Corporations

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Question 51

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Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA at the beginning of the calendar tax year.Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock.Kinney's taxable income is $6,000 for the year.Kinney distributes $6,000 to each shareholder on February 1, and it distributes another $3,000 to each shareholder on September 1.How is Eric taxed on the distribution?

A) $500 dividend income.
B) $1,000 dividend income.
C) $1,500 dividend income.
D) $3,000 dividend income.

E) C) and D)
F) A) and B)

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Question 52

Multiple Choice

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Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year.On October 11, Samantha sells all of her Evita stock.Her stock basis at the beginning of the tax year was $60,000.Evita's ordinary income for the year was $22,000 through the date of sale, and Samantha receives a distribution of $35,000 on May 3rd.Her stock basis at the time of the sale is:

A) $117,000.
B) $82,000.
C) $60,000.
D) $47,000.

E) C) and D)
F) B) and D)

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Question 53

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Donna and Mark are married and file a joint return reporting taxable income of $350,000.Donna owns a qualified S corporation that is not a specified service business.During the year, she incurs qualified business income of $75,000.Donna's share of wages paid by the business is $20,000.Assuming there is no qualified property factor, calculate her 20% QBI deduction.

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

Which of the following items, if any, decreases an S corporation's AAA?

Which statement is incorrect with respect to filing an S election?

At the beginning of the year, the AAA of Rose, Inc.shows a balance of $682,000.During the year, the following items occur.Compute the end-of-year AAA balance.

The LIFO recapture tax is a variation of the passive investment income penalty tax.

Some ____________________and taxation rules apply to an S corporation.

An S corporation recognizes a on any distribution of appreciated property.

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

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

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

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

Most limited liability partnerships can own stock in an S corporation.

You are given the following facts about a 40% owner of an S corporation.Calculate her ending stock basis.

You are given the following facts about a 50% owner of an S corporation.Compute her ending stock basis.

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

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

The maximum number of actual shareholders in an S corporation is: