25 May Question 1. Which statement is incorrectwith respect to an S shareholder’s consent?
Question
1. Which statement is incorrectwith respect to an S shareholder’s consent?
a. A consent extension is available only if Form 2553 is filed on a timely basis, reasonable cause is given, and the interests of the government are not jeopardized.
b. Both husband and wife must consent if one owns the stock as community property.
c. An S election requires a consent from all of the S corporation’s shareholders.
d. A consent must be in writing.
e. None of the above statements is incorrect.
2. Which item does notappear on Schedule K of Form 1120S?
a. Tax-exempt interest income.
b. Section 1231 gain.
c. Section 179 depreciation deduction.
d. Depreciation recapture income.
e. All of the above appear on Schedule K.
3. Which item is notincluded in an S corporation’s nonseparately computed income?
a. Net sales.
b. Cost of goods sold.
c. Dividends received.
d. Depreciation recapture.
4. Which item does notappear on Schedule K of Form 1120S?
a. Intangible drilling costs.
b. Foreign loss.
c. Utilities expense.
d. Recovery of a tax benefit.
e. All of the above items appear on Schedule K.
5. What method is used to allocate S corporation income or losses (unless an election to the contrary is made)?
a. Any method agreed to by all of the shareholders.
b. Per-day allocation.
c. FIFO method.
d. LIFO method.
e. Some other method.
6. Which item has no effect on an S corporation’s AAA?
a. Stock purchase by a shareholder.
b. Interest expense.
c. Cost of goods sold.
d. Capital loss.
e. All of the above modify AAA.
7. If an S corporation’s beginning balance in OAA is zero, and the following transactions occur, what is the ending
OAA balance?
| Depreciation recapture income | $21,000 |
| Payroll tax penalty | 4,200 |
| Tax-exempt interest income | 5,300 |
| Nontaxable life insurance proceeds | 5,100 |
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