Question 1

Oxen Corporation incurs the following transactions.  Oxen maintains a valid S election and does not distribute any assets (cash or property)  to its sole shareholder, Megan.As a result, Megan must recognize (ignore 20% QBI deduction) :

Accepted Answer

A)  Ordinary income of $103,000.
B)  Ordinary income of $103,000 and long-term capital gain of $6,000.
C)  Ordinary income of $103,000, long-term capital gain of $10,000, and $4,000 short-term capital loss.
D)  Ordinary income of $109,000.E) A) and D)
F) B) and C)

Question 2

An S corporation is limited to a theoretical maximum of shareholders.

Accepted Answer

The answer of An S corporation is limited to a...

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Where the S corporation rules are silent, C corporation provisions apply.

Accepted Answer

A) True 
 B)False

Question 6

Which item is not included in an S corporation's nonseparately computed income?

Accepted Answer

A)  Net sales.
B)  Cost of goods sold.
C)  Dividends received.
D)  Depreciation recapture.
E)  All of these are included in non-separately computed income.F) All of the above
G) D) and E) C

Question 7

Depreciation recapture income is a (separately, nonseparately) computed amount.

Accepted Answer

The answer of Depreciation recapture income is a (separately, nonseparately)...

Question 8

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

Accepted Answer

A)  Tax-exempt interest income.
B)  Section 1231 gain.
C)  Section 179 depreciation deduction.
D)  Depreciation recapture income.
E)  All of these appear on Schedule K.F) D) and E)
G) B) and D)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

On January 2, 2019, David loans his S corporation $10,000.By the end of 2019 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2020, the company's operating income is $10,000.The company makes 2020 distributions to David of $11,000.David reports a(n) :

Accepted Answer

A)  $1,000 LTCG.
B)  $3,000 LTCG.
C)  $11,000 LTCG.
D)  Loan basis of $10,000.E) A) and B)
F) B) and D)

Question 11

Only 51% of the shareholders must consent to an S election.

Accepted Answer

A) True 
 B)False

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

Which statement is incorrect?

Accepted Answer

A)  S corporations are treated as corporations under state law.
B)  S corporations are treated as partnerships for Federal income tax purposes.
C)  Distributions of appreciated property are taxable to the S corporation.
D)  All of these.E) B) and D)
F) B) and C)

Question 14

The corporate-level tax on recognized built-in gains applies when an S corporation disposes of an asset in a taxable disposition within five years after the date on which the S election took effect.

Accepted Answer

A) True 
 B)False  True

Question 15

A former spouse is treated as being in the same family as the individual to whom he or she was married for purposes of determining the number of S corporation shareholders.

Accepted Answer

A) True 
 B)False

Question 16

A per-day, per-share allocation of flow-through S corporation items must be used.

Accepted Answer

A) True 
 B)False

Question 17

NOL carryforwards from C years can be used in an S corporation year against ordinary income.

Accepted Answer

A) True 
 B)False

Question 18

A service-type S corporation shareholder cannot claim the 20% QBI deduction.

Accepted Answer

A) True 
 B)False

Question 19

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, which of the following must Patty recognize? Ignore the 20% QBI deduction.

Accepted Answer

A)  Ordinary income of $115,000 and long-term capital gain of $5,000.
B)  Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.
C)  Ordinary income of $120,000.
D)  Capital gain of $120,000.E) C) and D)
F) None of the above

Question 20

An S corporation's AAA can have a negative balance.

Accepted Answer

A) True 
 B)False

Exam 15: S Corporations

Oxen Corporation incurs the following transactions. Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan.As a result, Megan must recognize (ignore 20% QBI deduction) :

Correct AnswerverifiedShow Answer

An S corporation is limited to a theoretical maximum of shareholders.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

Where the S corporation rules are silent, C corporation provisions apply.

Correct AnswerverifiedShow Answer

Which item is not included in an S corporation's nonseparately computed income?

Correct AnswerverifiedC

Depreciation recapture income is a (separately, nonseparately) computed amount.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On January 2, 2019, David loans his S corporation $10,000.By the end of 2019 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2020, the company's operating income is $10,000.The company makes 2020 distributions to David of $11,000.David reports a(n) :

Correct AnswerverifiedShow Answer

Only 51% of the shareholders must consent to an S election.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which statement is incorrect?

Correct AnswerverifiedShow Answer

The corporate-level tax on recognized built-in gains applies when an S corporation disposes of an asset in a taxable disposition within five years after the date on which the S election took effect.

Correct AnswerverifiedTrue

A former spouse is treated as being in the same family as the individual to whom he or she was married for purposes of determining the number of S corporation shareholders.

Correct AnswerverifiedShow Answer

A per-day, per-share allocation of flow-through S corporation items must be used.

Correct AnswerverifiedShow Answer

NOL carryforwards from C years can be used in an S corporation year against ordinary income.

Correct AnswerverifiedShow Answer

A service-type S corporation shareholder cannot claim the 20% QBI deduction.

Correct AnswerverifiedShow Answer

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, which of the following must Patty recognize? Ignore the 20% QBI deduction.

Correct AnswerverifiedShow Answer

An S corporation's AAA can have a negative balance.

Correct AnswerverifiedShow Answer

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True

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C

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True

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