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Exam 15: S Corporations

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Question 41

Multiple Choice

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A new S corporation shareholder can revoke the S election unilaterally,if he/she owns how much of the existing S corporation's stock?

A) More than 50%.
B) 50% or more.
C) The election can be revoked only if all of the shareholders consent.
D) The election cannot be revoked during the first year of the new shareholder's ownership.

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

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Question 42

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An S shareholder's stock basis does not include a ratable share of S corporation liabilities.

A) True
B) False

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Question 43

Multiple Choice

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Which corporation is eligible to make the S election?

A calendar year C corporation reports a $41,000 NOL in 2014,but it elects S status for 2015 and generates an NOL of $30,000 in that year.At all times during 2015,the stock of the corporation was owned by the same 10 shareholders,each of whom owned 10% of the stock.Kris,one of the 10 shareholders,holds an S stock basis of $2,300 at the beginning of 2015.How much of the 2015 loss,if any,is deductible by Kris?

Depreciation recapture income is a Schedule K item on the Form 1120S.

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

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

Four unrelated individuals acquire assets on behalf of Jump Corporation on May 21,2015,purchased assets on June 5,2015,and begin doing business on June 15,2015.They subscribe to shares of stock,file articles of incorporation for Jump,and become shareholders on July 23,2015.The S election must be filed no later than 2 1/2 months after:

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

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

An S corporation shareholder's stock basis includes his or her direct investments plus a ratable share of any corporate liabilities.

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

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

S corporations are treated as partnerships under state property laws.

What method is used to allocate S corporation income or losses (unless an election to the contrary is made) ?

Distribution of loss property by an S corporation to a shareholder generally should be _________________.

An S election is made on the shareholder's Form 2553.

On January 2,2014,David loans his S corporation $10,000.By the end of 2014 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2015,the company's operating income is $10,000.The company makes 2015 distributions to David of $11,000.David reports a(n) :

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity,but distributions do not reduce loan basis.