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Exam 22: S Corporations

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Question 61

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

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Question 62

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During 2014, Oxen Corporation incurs the following transactions. $\begin{array}{llr} \text {Net income from operations } &\$100,000\\ \text { Interest income from savings account} &3,000\\ \text { Long-term capital gain from sale of securities} &10,000\\ \text { Short-term canital loss from sale of securities } &4,000\\\end{array}$ Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize:

A) Ordinary income of $103,000.
B) Ordinary income of $103,000 and long-term capital gain of $5,000.
C) Ordinary income of $103,000, long-term capital gain of $10,000, and $4,000 short-term capital loss.
D) Ordinary income of $109,000.

E) None of the above
F) B) and C)

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Question 63

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Several individuals acquire assets on behalf of Skip Corporation on May 28, 2014, purchased assets on June 3, 2014, and began business on June 11, 2014. They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2014. The S election must be filed no later than 2 1/2 months after:

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

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

Estela, Inc., a calendar year S corporation, incurred the following items in 2014. $\begin{array}{lr}\text { Municipal bond interest } &\$ 7,000 \\\text { Sales } & 120,000 \\\text { Depreciation recapture income } & 14,000\\\text { Long-term capital gain } & 20,000 \\\text { Cost of goods sold } & (42,000 )\\\text { Administrative expenses } & (15,000) \\\text { Depreciation expense } & (13,000) \\\text { Charitable contributions } & (10,000)\end{array}$ $\text { Calculate Estela's nonseparately computed income }$

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

Arizona is a(n) property state for purposes of the S corporation requirements.

The § 1202 exclusion of gain is not available on disposition of S corporation stock.

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

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

Match the term with the proper response. There may be more than one responses for each term. -Passive investment income (for passive investment income penalty tax)

Pepper, Inc., an S corporation, holds a $1 million balance in accumulated E&P. It 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?

The amount of any distribution to an S corporation shareholder is equal to the plus the fair market value of any other property distributed.

Discuss the two methods of allocating tax-related items to S corporation shareholders.

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

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

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

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

An S corporation must possess which of the following characteristics?