Question 1. [LO 4] When an S corporation shareholder has suspended losses due to t

1. [LO 4] When an S corporation shareholder has suspended losses due to the tax basis or at-risk limitation, is he allowed to deduct the losses if the S corporation status is terminated? Why or why not?

2. [LO 4] When considering C corporations, the IRS checks to see whether salaries paid are too large. In S corporations, however, it usually must verify that salaries are large enough. Account for this difference.

3. [LO 4] How does the tax treatment of employee fringe benefits reflect the hybrid nature of the S corporation?

4. [LO 4] If a corporation has been an S corporation since inception, describe how its operating distributions to its shareholders are taxed to the shareholders.

5. [LO 4] How are the tax consequences of a cash distribution different from those of a non-cash property distribution to both the corporation and the shareholders?

6. [LO 5] What role does debt basis play in determining the taxability of operating distributions to shareholders?

7. [LO 5] What does the accumulated adjustments account represent? How is it adjusted year by year? Can it have a negative balance?

8. [LO 5] If an S corporation with accumulated E&P makes a distribution, from what accounts (and in what order) is the distribution deemed to be paid from?

9. [LO 5] Under what circumstances could a corporation with earnings and profits make a tax-free distribution to its shareholders after the S election termination?

10. [LO 5] How do the tax consequences of S corporation liquidating distributions differ from the tax consequences of S corporation operating distributions at both the corporate and shareholder levels?

11. [LO 6] When is an S corporation required to pay a built-in gains tax?

12. [LO 6] When is an S corporation required to pay the excess net passive income tax?

13. [LO 6]. Is the LIFO recapture tax a C corporation tax or an S corporation tax? Explain.

14. [LO 6] When must an S corporation make estimated tax payments?

15. [LO 6] On what form does an S corporation report its income to the IRS? When is the tax return due? What information does the S corporation provide to shareholders to allow them to complete their tax returns?

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