FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: S Corporations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following statements is correct regarding S corporation estimated taxes?

A) S corporations never pay estimated taxes.
B) S corporations with a federal income tax liability of $500 due to the built-in gains tax or excess net passive income tax must pay estimated taxes.
C) S corporations that owe $5,000 in LIFO recapture tax only must pay estimated taxes.
D) S corporations with a federal income tax liability of $100 due to the excess net passive income tax must pay estimated taxes.
E) None of the choices are correct.

F) None of the above
G) A) and C)

Correct Answer

verified

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

SoTired, Incorporated, a C corporation with a June 30 year-end, elects S corporation status this year. Assuming no special elections, SoTired, Incorporated, will continue to use a June 30 year-end as an S corporation.

A) True
B) False

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

S corporations may have no more than 50 shareholders, but members of the same family only count as one shareholder.

Assume Joe Harry sells his 25percent interest in Joe's S Corporation, to Tyrone on January 29. Using the specific identification allocation method, how much income does Joe Harry report if Joe's S Corporation, earned $225,000 from January 1 to January 29 and a total of $2,372,500 from January 1 through December 31 (365 days) ?

Distributions to owners may not cause the AAA to go negative or to become more negative.

Separately stated items are tax items that are treated similarly for tax purposes as a shareholder's share of ordinary business income (loss).

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $43,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $41,500. For 2021, J.D. was allocated $10,700 of ordinary income from Clampett, Incorporated, and no separately stated items. How much capital gain does J.D. recognize related to Clampett, Incorporated, in 2021?

Which of the following income items from an S corporation is not considered investment income for purposes of the net investment income tax?

During 2020, MVC operated as a C corporation. However, it made an election to be taxed as an S corporation effective January 1, 2021. MVC uses the accrual method of accounting and uses the LIFOmethod of accounting for its inventory. At the end of 2020 its inventory basis under the LIFO method was $80,000. If MVC had used the FIFOmethod of accounting for its inventory, it would have had a $100,000 basis in its inventory. Finally, MVC's regular taxable income in 2020 was $5,000. What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

Which of the following statements is correct?

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $80,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $36,000. For 2021, J.D. was allocated $35,000 of ordinary income from Clampett, Incorporated, and no separately stated items. What is J.D.'s basis in his Clampett, Incorporated, stock after all transactions in 2021?

During the post-termination transition period, property distributions are tax-free to shareholders to the extent they do not exceed the S corporation's AAA balance and the individual shareholder's basis in the stock.

Assume Joe Harry sells his 25percent interest in Joe's S Corporation, to Tyrone on January 29. Using the daily allocation method, how much income does Joe Harry report if Joe's S Corporation,earned $190,000 from January 1 to January 29 and a total of $547,500 from January 1 through December 31 (365 days) ?

S corporation shareholders are not allowed to include any S corporation-level debt in their stock basis.

An S corporation can make a voluntary revocation of an S election if shareholders holding more than 25 percent of the S corporation stock (including nonvoting shares) agree.

As in partnerships, an S corporation shareholder's basis is dynamic and must be adjusted annually.

Which of the following is not an adjustment to an S corporation shareholder's stock basis?

Unlikein partnerships, adjustments that decrease an S corporation shareholder's basis may reduce it below zero.

CB Corporation was formed as a calendar-year S corporation. Casey is a 60percent shareholder and Bryant is a 40percent shareholder. On September 30, 2020, Bryant sold his CB shares to Don. CB reported business income for 2020 as follows: (Assume that there are 365 days in the year.) How much 2020 income is allocated to each shareholder if CB uses its normal accounting rules to allocate income to the specific periods in which it was actually earned?

MWC is a C corporation that uses the accrual method of accounting. MWC made an S election, effective January 1 of 2020. The following assets were owned by MWC on December 31, 2019. What is MWC's net unrealized built-in gain when it converts to an S corporation on January 1, 2020?