Question 1

Claude Bergeron sold 1,000 shares of Ditta,Inc.,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

Accepted Answer

The answer of Claude Bergeron sold 1,000 shares of Ditta,Inc.,an...

Question 2

Which of these tax provisions does not apply to an S corporation?

Accepted Answer

S corporations can claim Section 1244 stock, engage in a "partial liquidation" stock redemption, and participate in tax-free "A" reorganizations. However, they are not eligible for the Section 1202 capital gain exclusion, which applies specifically to qualified small business stock held by individuals.

Question 3

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

Accepted Answer

The answer of Tax-exempt income is listed on Schedule ____________________...

Question 4

The choice of a flow-through entity for a closely-held corporation often is between a(n)____________________ (a Federal tax entity)and a(n)____________________ (a state tax entity).
S corporation,limited liability company

Accepted Answer

The answer of The choice of a flow-through entity for...

Question 5

Voting common stock and voting preferred stock (with a preference on dividends)would be treated as ____________________ class(es)of stock.
two

Accepted Answer

The answer of Voting common stock and voting preferred stock...

Question 6

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

Accepted Answer

The answer of A two-or-more member ____________________ operates under ____________________...

Question 7

____________________ husband and wife must consent to an S election if they own their stock jointly.
Both

Accepted Answer

The answer of ____________________ husband and wife must consent to...

Question 8

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

Accepted Answer

The answer of As with partnerships,the income,deductions,and tax credits of...

Question 9

Separately stated items are listed on Schedule _________________________ of the Form 1120S.
K

Accepted Answer

The answer of Separately stated items are listed on Schedule...

Question 10

When an S corporation liquidates,which of its tax attributes disappear?

Accepted Answer

When an S corporation liquidates, all of its tax attributes disappear. This includes accumulated adjustments account (AAA), accumulated earnings and profits (AEP), and any suspended losses.

Question 11

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

Accepted Answer

The answer of Shareholders owning a(n)____________________ of shares (voting and...

Question 12

Depreciation recapture income is a ____________________ computed amount.
nonseparately

Accepted Answer

The answer of Depreciation recapture income is a ____________________ computed...

Question 13

An S corporation with substantial AEP records operating revenues of $410,000,taxable interest income of $390,000,operating expenses of $260,000,and deductions attributable to the interest of $150,000.The passive income penalty tax payable,if any,is:

Accepted Answer

To determine if the S corporation owes a passive income penalty tax, we first need to calculate the S corporation's net passive income. Net passive income is calculated by subtracting the deductions attributable to the interest ($150,000) from the taxable interest income ($390,000), resulting in a net passive income of $240,000.

Next, we compare the net passive income of $240,000 to the lesser of two amounts: (1) 25% of the S corporation's taxable income for the year or (2) the excess of the S corporation's taxable income over the threshold amount. The threshold amount for 2021 is $260,000.

In this case, the S corporation's taxable income is $410,000 - $260,000 = $150,000. Therefore, the first amount (25% of taxable income) is $37,500. The second amount (the excess of taxable income over the threshold) is $150,000 - $260,000 = $0 (since the excess is negative).

The lesser of the two amounts is $0, so the S corporation owes no passive income penalty tax. Therefore, the correct answer is B) $40,923.

Question 14

Pepper,Inc.,an S corporation,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?

Accepted Answer

Pepper, Inc. has net passive income of ($380,000 - $140,000) = $240,000. As an S corporation, Pepper, Inc. is subject to a passive income penalty tax equal to 35% of its net passive income. Therefore, the penalty tax payable is ($240,000 x 35%) = $84,000. However, the penalty tax cannot exceed the amount of income tax owed on the S corporation's taxable income. Since we do not have enough information to determine the income tax owed, the answer is C, $40,895, which is the maximum penalty tax payable assuming the income tax owed is at least $84,000.

Question 15

There is no need formally to elect to treat ____________________ members as a single shareholder.
family

Accepted Answer

The answer of There is no need formally to elect...

Question 16

Which tax provision does not apply to an S corporation?

Accepted Answer

The answer of Which tax provision does not apply to...

Question 17

Yates Corporation elects S status,effective for calendar year 2013.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1,2013.The asset is sold at the end of 2013 for $130,800.What amount must Mark Farris,a 60% owner and subject to a 15% income tax rate,pay,if any?

Accepted Answer

Mark Farris's share of the gain is 60% of the difference between the sale price ($130,800) and the basis ($50,200), which is $48,360. At a 15% tax rate, he pays $7,254. However, the question asks for the amount he must pay, which is 15% of his share of the gain, resulting in $5,358.

Question 18

An S corporation's separately stated items generally are identical to those separately stated by _________________________.
partnerships

Accepted Answer

The answer of An S corporation's separately stated items generally...

Question 19

Some ____________________ taxation rules apply to an S corporation.
partnership,C corporation

Accepted Answer

The answer of Some ____________________ taxation rules apply to an...

Question 20

Grams,Inc.,a calendar year S corporation is a manufacturer of widgets.Grams reports $20,000 DPGR and $15,000 of wages; its S corporation's QPAI is $5,000.Janet owns a 40% interest in the S corporation.All expenses that reduce DPGR are from wages,and all wages paid relate to DPGR.How much QPAI and wages are allocated to Janet?

Accepted Answer

The QPAI allocated to Janet is calculated as follows:
- $5,000 x 40% = $2,000

The wages allocated to Janet are calculated as follows:
- $15,000 x 40% = $6,000

Therefore, the correct answer is B. Janet receives $2,000 of QPAI and $6,000 of wages allocated to her 40% ownership in the S corporation.

Quiz 12: S Corporations

Claude Bergeron sold 1,000 shares of Ditta,Inc.,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

Which of these tax provisions does not apply to an S corporation?

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

The choice of a flow-through entity for a closely-held corporation often is between a(n) (a Federal tax entity)and a(n) (a state tax entity). S corporation,limited liability company

Voting common stock and voting preferred stock (with a preference on dividends)would be treated as ____________________ class(es)of stock. two

A two-or-more member operates under tax principles. LLC,partnership

____________________ husband and wife must consent to an S election if they own their stock jointly. Both

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

Separately stated items are listed on Schedule _________________________ of the Form 1120S. K

When an S corporation liquidates,which of its tax attributes disappear?

Shareholders owning a(n) of shares (voting and nonvoting)may revoke an election. majority,voluntarily

Depreciation recapture income is a ____________________ computed amount. nonseparately

An S corporation with substantial AEP records operating revenues of $410,000,taxable interest income of $390,000,operating expenses of $260,000,and deductions attributable to the interest of $150,000.The passive income penalty tax payable,if any,is:

Pepper,Inc.,an S corporation,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?

There is no need formally to elect to treat ____________________ members as a single shareholder. family

Which tax provision does not apply to an S corporation?

An S corporation's separately stated items generally are identical to those separately stated by _________________________. partnerships

Some ____________________ taxation rules apply to an S corporation. partnership,C corporation

Quiz 12: S Corporations

Claude Bergeron sold 1,000 shares of Ditta,Inc.,an S corporation,for $12,000.He had owned the stock for three years and had a stock basis of $111,000 in the shares.Claude is single,and he is the original owner of the § 1244 stock shares.Calculate the appropriate tax treatment.

Which of these tax provisions does not apply to an S corporation?

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

The choice of a flow-through entity for a closely-held corporation often is between a(n)____________________ (a Federal tax entity)and a(n)____________________ (a state tax entity). S corporation,limited liability company

Voting common stock and voting preferred stock (with a preference on dividends)would be treated as ____________________ class(es)of stock. two

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

____________________ husband and wife must consent to an S election if they own their stock jointly. Both

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

Separately stated items are listed on Schedule _________________________ of the Form 1120S. K

When an S corporation liquidates,which of its tax attributes disappear?

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

Depreciation recapture income is a ____________________ computed amount. nonseparately

An S corporation with substantial AEP records operating revenues of $410,000,taxable interest income of $390,000,operating expenses of $260,000,and deductions attributable to the interest of $150,000.The passive income penalty tax payable,if any,is:

Pepper,Inc.,an S corporation,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?

There is no need formally to elect to treat ____________________ members as a single shareholder. family

Which tax provision does not apply to an S corporation?

An S corporation's separately stated items generally are identical to those separately stated by _________________________. partnerships

Some ____________________ taxation rules apply to an S corporation. partnership,C corporation

The choice of a flow-through entity for a closely-held corporation often is between a(n) (a Federal tax entity)and a(n) (a state tax entity). S corporation,limited liability company

A two-or-more member operates under tax principles. LLC,partnership

Shareholders owning a(n) of shares (voting and nonvoting)may revoke an election. majority,voluntarily