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Exam 22: S Corporations

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Question 21

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Form 1120S provides an S shareholder's computation of his or her stock basis.

A) True
B) False

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Question 22

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Which item does not appear on Schedule K of Form 1120S?

A) Intangible drilling costs.
B) Foreign loss.
C) Utilities expense.
D) Recovery of a tax benefit.
E) All of the above items appear on Schedule K.

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

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Question 23

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The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2019, the date the S election is made. During the year, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax.

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

Persons who were S shareholders during any part of the year before the election date, but were not shareholders when the election was made, also must consent to an S election.

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

When loss assets are distributed by an S corporation, a shareholder's basis is equal to the asset's fair market value.

You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

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

Which type of distribution from an S corporation is taxed at ordinary income rates?

Lemon Corporation incurs the following transactions. Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, Patty must recognize (ignore the 20% QBI deduction) :

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

Which, if any, of the following can be eligible shareholders of an S corporation?

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

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

A one person LLC can be a shareholder of an S corporation.

An estate may be a shareholder of an S corporation.

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

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