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Exam 22: S Corporations

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Question 61

True/False

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The pro rata method assigns an equal amount of each of the S corporation items (e.g. ,LTCG)to each day of the year.

A) True
B) False

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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 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?

A) $0.
B) $18,000.
C) $36,000.
D) $60,000.
E) None of the above.

F) B) and C)
G) A) and C)

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Question 63

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An S shareholder's basis is increased by stock purchases and capital contributions.

Distributions of which assets during an S corporation's post-termination period receive favorable income tax treatment?

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

Which type of distribution from an S corporation is taxed at the 0/15% rate?

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

Where the S corporation rules are silent,partnership rules apply to the S corporation.

On January 2,2009,David loans his S corporation $10,000,and by the end of 2009 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2010,the company's operating income is $10,000.The company also makes distributions to David of $11,000.Which statement is correct?

Passive investment income includes gains from the sale of securities.

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

If a loan's basis has been reduced and has not been restored,income is recognized when the S corporation ____________________ the shareholder.

The maximum number of S shareholders is:

Excess net passive income of an S corporation is $40,000 and taxable income is $32,000.Assuming that there is $50,000 of accumulated earnings and profits from a C corporation year,calculate any passive income penalty tax.

The taxable LIFO recapture amount equals the excess of the inventory's value under ____________________ over the ____________________ value.

Claude Bergeron sold 1,000 shares of Ditta,Inc. ,an S corporation located in Concord,North Carolina,for $9,000.He had owned the stock for three years and had a stock basis of $107,000 in the shares.Assuming that Claude is single and that he is the original owner of these § 1244 stock shares,calculate the appropriate tax treatment of any gain or loss.

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

An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.

Pepper,Inc. ,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.What is Pepper's § 1375 penalty tax payable?

The carryover period for the NOLs of a C corporation continues to run during S corporation years.