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Exam 22: S: Corporations

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Question 21

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Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

A) Charitable contributions.
B) Unreasonable compensation.
C) Payroll tax penalty assessed.
D) Domestic production activities deduction.
E) None of the above.

F) A) and E)
G) A) and D)

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Question 22

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Compensation for services rendered to an S corporation is subject to FICA taxes.

A) True
B) False

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Question 23

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Which equity arrangement cannot be used by an S corporation?

An S corporation can be a shareholder in another corporation.

Towne, Inc., a calendar year S corporation, has an AAA amount of $627,050 at the beginning of 2012. During the year, the following items occur. Calculate Towne's ending AAA balance.

You are given the following facts about a one-shareholder S corporation. Prepare the shareholder's ending stock basis.

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

S corporation status allows shareholders to realize tax benefits from corporate losses ____________________.

In the case of a complete termination of an S corporation interest, a ____________________ tax year may occur.

An S corporation with substantial AEP has operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000.The passive income penalty tax payable, if any, is:

The Schedule M-3 is the same for a C corporation and an S corporation.

Yates Corporation elects S status, effective for calendar year 2012.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1, 2012.The asset is sold at the end of 2012 for $130,800.What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

An S corporation may not have a ____________________ alien shareholder.

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

The maximum number of shareholders in an S corporation is:

Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

Realized gain is recognized by an S corporation on its distribution of ____________________ property.

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

Compare the distribution of property rules for an S corporation with the corresponding partnership rules.

An S corporation can take advantage of the dividends received deduction.