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Exam 22: S Corporations

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Question 1

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

A) True
B) False

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Question 2

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Which statement is incorrect with respect to an S shareholder's consent?

A) A consent extension is available only if Form 2553 is filed on a timely basis,reasonable cause is given,and the interests of the government are not jeopardized.
B) Both husband and wife must consent if one owns the stock as community property.
C) An S election requires a consent from all of the S corporation's shareholders.
D) A consent must be in writing.
E) None of the above statements is incorrect.

F) B) and D)
G) A) and B)

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Question 3

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A newly formed S corporation does not receive any tax benefit from an NOL incurred in its first tax year.

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

Grams,Inc. ,a calendar year S corporation is a manufacturer of widgets.Grams reports $20,000 DPGR and $15,000 of wages;its S corporation's QPAI is $5,000.Janet owns a 40% interest in the S corporation.All expenses that reduce DPGR are from wages,and all wages paid relate to DPGR.How much QPAI and wages are allocated to Janet?

A per-day,per-share allocation of flow-through S corporation items must be used,unless the shareholder disposes of the entire interest in the entity.

Shareholders owning a(n) ____________________ of shares (voting and nonvoting) may ____________________ revoke an election.

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

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

Tax-exempt income is listed on Schedule ____________________ of Form 1120S.

As with partnerships,the income,deductions,and tax credits of an S corporation ____________________ to the shareholders annually.

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

Most IRAs cannot own stock in an S corporation.

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

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

If any entity electing S status is currently a C corporation,NOL carryovers from prior years ____________________ be used in an S corporation year.

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

Bidden,Inc. ,a calendar year S corporation,incurred the following items. Sales $130,000 Depreciation recapture income 12,000 Short-term capital gain 30,000 Cost of goods sold (42,000) Municipal bond interest income 7,000 Administrative expenses (15,000) Depreciation expense (17,000) Charitable contributions (14,000) ​ Calculate Bidden's nonseparately computed income.

Most limited liability partnerships can own stock in an S corporation.

Mock Corporation converts to S corporation status in 2015.Mock used the LIFO inventory method in 2014 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 Mock's 2014 corporate tax liability,assuming that Mock is subject to a 35% tax rate.