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Exam 22: S: Corporations

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Question 31

True/False

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An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss) up to the date of death on the final individual tax return.

A) True
B) False

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Question 32

Multiple Choice

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How large must total assets on Schedule L be at the end of the year for an S corporation to be required to file Schedule M-3?

A) $1 million.
B) $5 million.
C) $10 million.
D) $100 million.

E) B) and C)
F) C) and D)

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Question 33

Multiple Choice

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

Which statement is incorrect?

On January 1, 2012, Zundel, Inc., an electing S corporation, has $4,000 of AEP and a balance of $10,000 in AAA.Zundel has two shareholders, Erin and Maine, each of whom owns 500 shares of Zundel's stock.Zundel's 2012 taxable income is $5,000.Zundel distributes $6,000 to each shareholder on February 1, 2012, and distributes another $3,000 to each shareholder on September 1.How is Erin taxed on this distribution?

A qualifying S election requires the consent of ____________________ of the corporate shareholders. or

On December 31, 2011, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.During 2012, the S corporation has no income or deductions, but incurs a loss of $3,650.Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of 2012.

The § 1202 exclusion of gain is available on disposition of S corporation stock.

S corporation status combines the legal environment of ____________________ with taxation similar to that applying to ____________________. or

____________________ debt in an S corporation year is not treated as a second class of stock and does not disqualify the S election.

Several individuals acquire assets on behalf of Skip Corporation on May 28, 2012, purchased assets on June 3, 2012, and began business on June 11, 2012.They subscribe to shares of stock, file articles of incorporation for Skip, and become shareholders on June 21, 2012.The S election must be filed no later than 2 1/2 months after:

A capital loss allocated to a shareholder always reduces the Other Adjustments Account.

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

Tax-exempt income is not separately stated on Schedule K of Form 1120S.

Depletion in excess of basis in property causes a(n) ____________________ adjustment to an S shareholder's basis. or

An S shareholder's basis in his or her stock can be reduced below zero.

Stock basis first is increased by income items, then ____________________ by distributions, and finally decreased by ____________________.

Mock Corporation converts to S corporation status in 2012.Mock used the LIFO inventory method in 2011 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election.How much tax must be added to the 2011 corporate tax liability, assuming that Mock is subject to a 35% tax rate.

Only 80% of the shareholders must consent to an S election.

Which corporation is eligible to make the S election?