Question 1

The _______________ and ______________ limitations apply to losses generated by an S Corporation.

Accepted Answer

The answer of The _______________ and ______________ limitations apply to...

Question 2

Match the term with the proper response. There may be more than one responses for each term.
a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc.
b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property.
c.Cumulative total of undistributed non-separately stated items.
d.Tax-free distribution.
e.Generated under old S corporation rules (pre-1983).
f.Items that affect basis but not AAA go here.
g.Taxed as a dividend.
-Passive investment income tax

Accepted Answer

The answer of Match the term with the proper response....

Question 3

Match the term with the proper response. There may be more than one responses for each term.
a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc.
b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property.
c.Cumulative total of undistributed non-separately stated items.
d.Tax-free distribution.
e.Generated under old S corporation rules (pre-1983).
f.Items that affect basis but not AAA go here.
g.Taxed as a dividend.
-AAA

Accepted Answer

The answer of Match the term with the proper response....

Question 4

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

Accepted Answer

The answer of An S corporation is limited to a...

Question 5

An S corporation may lose its S tax status:

Accepted Answer

§ 1362

Question 6

Match the term with the proper response. There may be more than one responses for each term.
a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc.
b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property.
c.Cumulative total of undistributed non-separately stated items.
d.Tax-free distribution.
e.Generated under old S corporation rules (pre-1983).
f.Items that affect basis but not AAA go here.
g.Taxed as a dividend.
-Built-in gain tax

Accepted Answer

The answer of Match the term with the proper response....

Question 7

_________________ taxation rules do not apply to an S corporation.

Accepted Answer

The answer of _________________ taxation rules do not apply to...

Question 8

An S corporation in Polly Beach,South Carolina,reports a recognized built-in gain of $95,000 and taxable income of $80,000.It holds a $7,000 NOL carryforward and a $9,000 business credit carryforward from a C corporation year.There are no earnings and profits from C corporation years.The built-in gains tax liability is:

Accepted Answer

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Question 9

Match the term with the proper response. There may be more than one responses for each term.
a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc.
b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property.
c.Cumulative total of undistributed non-separately stated items.
d.Tax-free distribution.
e.Generated under old S corporation rules (pre-1983).
f.Items that affect basis but not AAA go here.
g.Taxed as a dividend.
-OAA

Accepted Answer

The answer of Match the term with the proper response....

Question 10

An S corporation with substantial AEP has 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 possible investment income penalty tax payable is:

Accepted Answer

ENPI = (Net Passive Income/PII)F1F1F1S1F1F1F10 (PII - 25% GR)
ENPI = [($390,000 - $150,000)/$390,000] F1F1F1S1F1F1F10 [$390,000 - (25% F1F1F1S1F1F1F10 $800,000)]
ENPI = ($240,000/$390,000)F1F1F1S1F1F1F10 $190,000
ENPI = $116,923
Since taxable income of $390,000 is more than ENPI,the § 1375 tax is $116,923 F1F1F1S1F1F1F10 35%,or $40,923.

Question 11

An S corporation reports $10,000 DPGR and $7,500 of wages,and the S corporation's QPAI is $2,500.Shelly has a 50% 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 Shelly?

Accepted Answer

The answer of An S corporation reports $10,000 DPGR and...

Question 12

When Gail dies,she owns 100% of the stock of an S corporation,with an adjusted basis of $10,000 and FMV of $100,000.The AB and FMV of the assets inside the S corporation are the same amounts.Gail's son Phil inherits all of the stock,but does not wish to continue the business.Therefore,the S corporation sells the assets,resulting in a $90,000 capital gain,and liquidates.Assuming that Phil is subject to a marginal tax rate of 30%,what taxes are due?

Accepted Answer

Phil obtains a step-up in basis in the stock to $100,000.When the assets are sold,the $90,000 gain flows through to increase his stock basis to $190,000.Then,when the $100,000 cash proceeds are distributed upon liquidation,Phil reports a $90,000 capital loss ($190,000 - $100,000),which can be offset against the $90,000 flow-through gain.Thus,Phil gets a step-up in basis with no tax liability.

Question 13

The maximum individual tax rate is ______________ (higher,lower,the same)as the corporate income rate.

Accepted Answer

The answer of The maximum individual tax rate is ______________...

Question 14

At the end of 2008,Newt,an S corporation,has gross receipts of $190,000 and gross income of $170,000.Newt has AEP of $22,000 and taxable income of $30,000.There is passive investment income of $100,000,with $40,000 of expenses directly related to the production of passive investment income.Newt's PII (§ 1375)penalty tax is:

Accepted Answer

Taxable income is less than ENPI,so 35% F1F1F1S1F1F1F10 $30,000 = $10,500.
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Question 15

If any entity electing S status is currently a C corporation,NOL carryovers from prior years ________________ be used in an S corporation year.

Accepted Answer

The answer of If any entity electing S status is...

Question 16

Match the term with the proper response. There may be more than one responses for each term.
a.Includes gross receipts derived from royalties, passive rents, dividends, interest, etc.
b.Penalty tax to stop an S corporation from avoiding the corporate tax on disposition of appreciated property.
c.Cumulative total of undistributed non-separately stated items.
d.Tax-free distribution.
e.Generated under old S corporation rules (pre-1983).
f.Items that affect basis but not AAA go here.
g.Taxed as a dividend.
-PTI

Accepted Answer

The answer of Match the term with the proper response....

Question 17

Which of the following items are increases on Schedule M-3 on the Form 1120S,for an S corporation with $230,000 in ordinary income?

Accepted Answer

Item b.generates no Schedule M-3 effect,and item c.is a decrease on Schedule M-3.

Question 18

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:

Accepted Answer

Under § 1363(d),gain is recognized to the distributing corporation to the extent of any appreciation in the asset or $50,000 ($80,000 - $30,000).

Question 19

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

Accepted Answer

The answer of If shareholders have high marginal rates relative...

Question 20

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

Accepted Answer

All attributes disappear.

Quiz 12: S Corporations

The _ and limitations apply to losses generated by an S Corporation.

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

An S corporation may lose its S tax status:

_________________ taxation rules do not apply to an S corporation.

An S corporation with substantial AEP has 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 possible investment income penalty tax payable is:

An S corporation reports $10,000 DPGR and $7,500 of wages,and the S corporation's QPAI is $2,500.Shelly has a 50% 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 Shelly?

The maximum individual tax rate is ______________ (higher,lower,the same)as the corporate income rate.

If any entity electing S status is currently a C corporation,NOL carryovers from prior years ________________ be used in an S corporation year.

Which of the following items are increases on Schedule M-3 on the Form 1120S,for an S corporation with $230,000 in ordinary income?

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:

If shareholders have high marginal rates relative to C corporation rates,it may be desirable to ________________ S corporation status.

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