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Exam 11: S Corporations

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Question 41

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After terminating or voluntarily revoking S corporation status,a corporation may elect it again,but it generally must wait until the beginning of the third tax year after the tax year in which it terminated the election.

A) True
B) False

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Question 42

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Suppose at the beginning of 2017,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 2017,Jamaal's share of S corporation income is $4,000,and he received a $7,000 distribution from the S corporation.How much income does Jamaal report in 2017 from these transactions?

A) $0.
B) $4,000.
C) $6,000.
D) $7,000.
E) None of the choices are correct.

F) A) and B)
G) A) and E)

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Question 43

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For S corporations without earnings and profits from prior C corporation years,the taxation of cash distributions to the shareholder is very similar to the rules for partnerships.

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

Which of the following S corporations would be subject to the excess net passive income tax?

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.

Which of the following statements is correct regarding S corporation estimated taxes?

On March 15,2017,J.D.sold his Clampett,Inc.(an S corporation) shares to Ellie Mae,Inc.(a C corporation) ,terminating Clampett,Inc.'s S election on March 15,2017.Absent permission from the IRS,what is the earliest date Clampett,Inc.may again elect to be taxed as an S corporation?

CB Corporation was formed as a calendar-year S corporation.Casey is a 60% shareholder and Bryant is a 40% shareholder.On September 30,2017,Bryant sold his CB shares to Don.CB reported business income for 2017 as follows (assume that there are 365 days in the year): How much 2017 income is allocated to each shareholder if CB corp.uses the daily method of allocating income?

Clampett,Inc.converted to an S corporation on January 1,2017.At that time,Clampett,Inc.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 2018,Clampett,Inc.sells its entire inventory for $60,000 (Basis $30,000) .Assuming the corporate tax rate is 35% and that Clampett,Inc.had a $20,000 net operating loss carryover from its prior C corporation years.How much built-in gains tax does Clampett,Inc.pay in 2018?

Assume that Clampett,Inc.has $200,000 of sales,$150,000 of cost of goods sold,$60,000 of interest income,and $40,000 of dividends.What is Clampett,Inc.'s excess net passive income?

If Annie and Andy (each a 30% shareholder in an calendar year S corporation) file a revocation statement on February 10,2017 to terminate their S corporation's S election,what is the effective date of the S corporation termination (assuming they do not specify one) ?

Suppose at the beginning of 2017,Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has directly loaned the S corporation $10,000.During 2017,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 50% shareholder of the S corporation?

Clampett,Inc.has been an S corporation since its inception.On July 15,2018,Clampett,Inc.distributed $50,000 to J.D.His basis in his Clampett,Inc.stock on January 1,2018,was $30,000.For 2018,J.D.was allocated $10,000 of ordinary income from Clampett,Inc.and no separately stated items.How much capital gain does J.D.recognize related to Clampett,Inc.in 2018?

Neal Corporation was initially formed as a C corporation with a calendar year end.Neal elected S corporation status,effective January 1,2017.On December 31,2016,Neal Corp.reported earnings and profits of $150,000.Beginning in 2017,Neal Corp.reported the following information.Does Neal Corp.'s S election terminate due to excess net passive income? If so,what is the effective date of the termination?

Clampett,Inc.(an S corporation) previously operated as a C corporation.Under general rules,distributions from Clampett,Inc.are deemed to be paid in the following order:

Suppose at the beginning of 2017,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 2017,Jamaal's share of S corporation income is $4,000,and he received a $7,000 distribution from the S corporation.What is Jamaal's stock and debt basis after these transactions?

S corporations may have no more than 50 shareholders,but members of the same family only count as one shareholder.

Assume that Clampett,Inc.has $200,000 of sales,$150,000 of cost of goods sold,$60,000 of interest income,and $40,000 of dividends.Assume that Clampett,Inc.never operated as a C corporation and that the corporate tax rate is 35%.What is Clampett,Inc.'s excess net passive income tax?

Like partnerships,S corporations generally determine their accounting periods and make accounting method elections at the entity level.