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Exam 22: S Corporations

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Question 31

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Since loss property receives a __________________ in basis without any loss recognition, S corporation distributions of loss property generally should be .

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Question 32

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A corporation can revoke its S election prospectively.

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Question 33

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If a resident alien shareholder moves outside the U.S., the S election is terminated.

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

On December 31, Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock. The basis of Erica's share is $300. The next year the S corporation incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of the second year.

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

Samantha owned 1,000 shares in Evita, Inc., an S corporation, that uses the calendar year. On October 11, Samantha sells all of her Evita stock. Her stock basis at the beginning of the tax year was $60,000. Evita's ordinary income for the year was $22,000 through the date of sale, and she receives a distribution of $35,000 on May 3rd. Her stock basis at the time of the sale is:

An S corporation can claim a deduction for its NOL amounts.

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.

Post-termination distributions that are charged against OAA are received tax-free.

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

A distribution from the other adjustment account (OAA) is not taxable to an S shareholder.

Distributions of appreciated property by an S corporation are not taxable to the entity.

Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to S stock during a post-termination transition period of approximately one year is applied against and reduces the basis of the S stock.

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. Calculate any passive investme income penalty tax payable by this corporation.

At the beginning of the year, the AAA of Rose, Inc. shows a balance of $682,000. During the year, the following items occur. Compute the end-of-year AAA balance.

Explain the OAA concept.

Fred is the sole shareholder of an S corporation in Fort Deposit, Alabama. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $100,000 (basis of $20,000) . Fred's taxable gain is:

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis?

Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA at the beginning of the calendar tax year. Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock. Kinney's taxable income is $6,000 for the year. Kinney distributes $6,000 to each shareholder on February 1, and it distributes another $3,000 to each shareholder on September 1. How is Eric taxed on the distribution?