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Exam 15: S Corporations

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Question 31

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An S corporation that has total assets of at least $50 million on Schedule L at the end of the tax year must file a Schedule M-3.

A) True
B) False

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Question 32

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Estella, Inc., a calendar year S corporation, incurred the following items during the tax year. $\begin{array} { l r } \text { Municipal bond interest } & \$ 7,000 \\\text { Sales } & 120,000 \\\text { Depreciation recapture income } & 14,000 \\\text { Long-term capital gain } & 20,000 \\\text { Cost of goods sold } & ( 42,000 ) \\\text { Administrative expenses } & ( 15,000 ) \\\text { Depreciation expense } & ( 13,000 ) \\\text { Charitable contributions } & ( 10,000 )\end{array}$ ​ Calculate Estella's nonseparately computed income.

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Question 33

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

An S corporation's LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

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

Post-termination distributions that are charged against OAA are received tax-free.

?If the beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance? ? $\begin{array} { l r } \text { Depreciation recapture income } & \$ 21,000 \\\text { Payroll tax penalty } & 4,200 \\\text { Tax-exempt interest } & 5,700 \\\text { Nontaxable life insurance proceeds } & 3,900 \\\text { Insurance premiums paid (nondeductible) } & 2,900 \\\text { Charitable contributions } & 17,000\end{array}$

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

An S corporation cannot be a shareholder in another corporation.

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

​This year, Sammy Joseph, the sole shareholder of a calendar year S corporation, received a distribution of $17,000.On December 31 of the prior year, his stock basis was $3,000.The corporation earned $12,000 ordinary income during the year.It has no accumulated E&P.Which statement is correct?

On December 31, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.The next year the S corporation incurs a loss of $3,650.Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of the second year.

​A corporation may alternate between S corporation and C corporation status each year, depending on which results in more tax savings.

A distribution from OAA is taxable.

Most IRAs cannot own stock in an S corporation.

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

An S shareholder's basis is decreased by distributions treated as being paid from AAA.

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

The passive investment income of an S corporation includes gains from the sale of securities.

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