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Exam 12: S Corporations

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Question 61

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Chris,the sole shareholder of Taylor,Inc. ,elects during 2010 to terminate the S election,effective January 1,2011.As of the end of 2010,Taylor,Inc. ,has AAA of $120,000 and OAA of $13,000.Chris receives a cash distribution of $130,000 on January 15,2011.If his stock basis is $220,000 before the distribution,calculate Chris' taxable amount and his ending stock basis.

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Cash distributions reduce the AAA ($120,...

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Question 62

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On January 1,Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight.The soil company has a $90,000 loss for a non-leap year.On the 219th day of the year,Bobby sells his one-half of the stock to his son,Naresh.How much of the $90,000 loss is allocated to Alice?

A) $0.
B) $18,000.
C) $27,000.
D) $45,000.
E) None of the above.

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

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Question 63

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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.

When an S corporation liquidates,which of its tax attributes disappear?

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

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

An S corporation can be a shareholder in another corporation.

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

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?

Passive investment income includes net capital gains from the sale of stocks and securities.

Any distribution made by an S corporation during a tax year is taken into account before accounting for the year's losses.

Any excess of S corporation losses or deductions over the shareholder's combined stock and debt basis is suspended until there is a subsequent stock or debt basis.

Dawn Adams owns 60% of a calendar year S corporation during 2010.Her stock basis on December 31,2009 is $17,000,and her debt basis is $2,000.If the S corporation incurs a $48,000 loss for 2010,what amount may Ms.Adams deduct on her individual tax return?

You are a 60% owner of an S corporation.Calculate your ending stock basis,based upon these facts.

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

Post-termination distributions that are charged against OAA do not get tax-free treatment.

Samantha owned 1,000 shares in Evita,Inc. ,an S corporation,that uses the calendar year.On October 11,2010,Samantha sells all of her Evita stock.Her basis at the beginning of 2010 was $60,000.Her share of the corporate income for 2010 was $22,000,and she receives a distribution of $37,000 between January 1 and October 11,2010.Her basis at the time of the sale is:

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

The passive loss limitations apply at the S corporation shareholder level.

On January 1,Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight.The dirt company has a $60,000 loss for a non-leap year.On the 219th day of the year,Bobby sells his one-half of the stock to his son,Paul.How much of the $60,000 loss,if any,is allocated to Bobby?