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Exam 22: S Corporations

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Question 31

True/False

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An item that appears in the "Other Adjustments Account" affects stock basis,but not AAA,such as tax-exempt interest.

A) True
B) False

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Question 32

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

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) C) and D)
G) B) and D)

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Question 33

Multiple Choice

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

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

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Some ____________________ taxation rules apply to an S corporation.

Which,if any,of the following can be eligible shareholders of an S corporation?

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

Alomar,a cash basis S corporation in Orlando,Florida,holds the following assets and liabilities on January 1,2015,the date the S election is made. Adjusted Basis Fair Market Value Cash $ 200,000 $ 200,000 Accounts receivable -0- 105,000 Equipment 110,000 100,000 Land 1,800,000 2,500,000 Accounts payable -0- 110,000 ​ During 2015,Alomar collects the accounts receivable and pays the accounts payable.The land is sold for $3 million,and the taxable income for the year is $590,000.Calculate any built-in gains tax.

In the case of a complete termination of an S corporation interest,a ____________________ tax year may occur.

Which statement is incorrect with respect to the number-of-shareholders test in filing an S election?

The § 1202 exclusion of _________________ on the disposition of small business stock (is/is not) _________________ available for S stock.

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

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.

Which corporation is eligible to make the S election?

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

Which could constitute a second class of stock?

Advise your client how income,expenses,gain,and losses are allocated to shareholders of an S corporation.

Since loss property receives a ____________________ in basis without any loss recognition,S corporation distributions of loss property should be ____________________.

An S corporation may not amortize its organization expenses.