FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: S Corporations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

Supposethat at the beginning of 2020 Jamaal's basis in his S corporation stock is $0, he has a $0 debt basis associated with a $10,000 loan he made to the S corporation, and he has a $5,000 suspended loss from the S corporation. In 2020, Jamaal contributed $8,000 to the S corporation, and the S corporation had ordinary income of $4,000. Assume that Jamaal owns 40 percent of the S corporation. What is Jamaal's stock and debt basis at the end of 2020?

A) $0 stock basis; $4,600 debt basis
B) $0 stock basis; $9,600 debt basis
C) $4,600 stock basis; $0 debt basis
D) $9,600 stock basis; $0 debt basis
E) None of the choices are correct.

F) B) and D)
G) C) and D)

Correct Answer

verified

Show Answer

Question 72

Essay

Review LaterAdd Note

Review Later

Hazel is the sole shareholder of Maple Corporation In 2020 Maple operated as a C Corporation and reported $15,000 of taxable income (and earnings and profits). On January 1, 2021, Maple elected S Corporation status. During 2021 Maple reported $12,000 of ordinary business income and no separately stated items. It also distributed $25,000 to Hazel. What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2021 (after accounting for the distribution) if her basis at the beginning of the year was $5,000?

Correct Answer

verified

The first $12,000 of the distribution co...

View Answer

Show Answer

Question 73

True/False

Review LaterAdd Note

When an S corporation distributes appreciated property to all of its shareholders pro rata, the shareholders who receive the distributed property recognize income on their distributive share of the deemed gain.

An S corporation shareholder's allocable share of ordinary business income (loss) is classified as self-employment income for tax purposes.

Which of the following is the correct order in which loss limitation rules are applied?

Suppose that at the beginning of 2020 Jamaal's basis in his S corporation stock is $1,000 and he has a $10,000 debt basis associated with a $10,000 loan he made to the S corporation. In 2020, Jamaal's share of S corporation income is $4,000, and he received a $7,000 distribution from the S corporation. How muchtotal income does Jamaal report in 2020 from these transactions?

An S corporation can use a noncalendar year-end if it can establish a business purpose for an alternative year-end.

Which of the following is not a separately stated item for S corporations?

XYZ Corporation (an S corporation) is owned by Jane and Rebecca, who are each 50percent shareholders. At the beginning of the year, Jane's basis in her XYZ stock was $55,000. XYZ reported the following tax information for 2020. Required: a. What amount of ordinary business income is allocated to Jane? b. What is the amount and character of separately stated items allocated to Jane? c. What is Jane's basis in her XYZ Corporation stock at the end of the year?

Clampett, Incorporated, converted to an S corporation on January 1, 2020. At that time, Clampett, Incorporated, had cash ($40,000) , inventory (FMV $60,000, basis $30,000) , accounts receivable (FMV $40,000, basis $40,000) , and equipment (FMV $60,000, basis $80,000) . In 2021, Clampett, Incorporated, sells its entire inventory for $60,000 (basis $30,000) . Assume the corporate tax rate is 21 percent and that Clampett, Incorporated, had a $20,000 net operating loss carryover from its prior C corporation years. How much built-in gains tax does Clampett, Incorporated, pay in 2021?

At the beginning of the year, Clampett, Incorporated, had $100,000 in its AAA and $60,000 of earnings and profits from prior C corporation years. During the year, Clampett, Incorporated, earned $50,000 of ordinary income and paid $200,000 in distributions to its shareholders. Assume that J.D. owns 25percent of Clampett, Incorporated, his basis in Clampett, Incorporated, at the beginning of the year is $10,000, and his share of the distribution was $50,000. How much, if any, of the distribution is taxable as a capital gain?

To make an S election effective as of the beginning of the current year, an S corporation must file IRS Form 2553 within three and a half months after the beginning of the year.

ABC was formed as a calendar-year S corporation with Alan, Brenda, and Conner as equal shareholders. On May 1, 2020, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation, Conner, Incorporated ABC reported business income for 2020 as follows: (Assume that there are 365 days in the year.) If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

CB Corporation was formed as a calendar-year S corporation. Casey is a 60percent shareholder and Bryant is a 40percent shareholder. On September 30, 2020, Bryant sold his CB shares to Don. CB reported business income for 2020 as follows: (Assume that there are 365 days in the year.) How much 2020 income is allocated to each shareholder if CB Corporation uses the daily method of allocating income?

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $50,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $45,000. For 2021, J.D. was allocated $10,000 of ordinary income from Clampett, Incorporated, and no separately stated items. What is J.D.'s basis in his Clampett, Incorporated, stock after all transactions in 2021?

Supposethat at the beginning of 2020 Jamaal's basis in his S corporation stock was $27,000 and Jamaal has directly loaned the S corporation $10,000. During 2020, the S corporation reported an $80,000 ordinary business loss and no separately stated items. After any loss deductions this year, what is Jamaal's stock and debt basis at the end of the year if Jamaal is a 50percent shareholder of the S corporation?

The estimated tax payment rules for S corporations generally follow the rules for C corporations.

Vanessa is the sole shareholder of V Corporation. V Corporation was formerly a C corporation but is currently an S corporation. At the end of 2020, before considering distributions, V Corporation's accumulated adjustments account (AAA) balance was $35,000 and its accumulated earnings and profits from its years as a C corporation was $10,000. On July 1, V Corporation distributed $60,000 to Vanessa. What is the amount and character of income Vanessa must recognize on the distribution if her stock basis before considering the distribution was $60,000? What is Vanessa's stock basis after accounting for the distribution?

The built-in gains tax does not apply to S corporations that never operated as C corporations.

Regarding debt, S corporation shareholders are deemed at risk only for direct loans they make to their S corporation.