25 May Question 1. Persons who were S shareholders during any part of the year before the ele
Question
1. Persons who were S shareholders during any part of the year before the election date, but were not shareholders when the election was made, also must consent to an S election.
a. True
b. False
2. The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.
a. True
b. False
3. The passive investment income of an S corporation includes gains from the sale of securities.
a. True
b. False
4. An S corporation may not amortize its organization expenses.
a. True
b. False
5. Tax-exempt income at the corporate level flows through as exempt to S shareholders.
a. True
b. False
6. The Section 179 expense deduction is a Schedule K item on the Form 1120S.
a. True
b. False
7. Depreciation recapture income is a Schedule K item on the Form 1120S.
a. True
b. False
8. A per-day, per-share allocation of flow-through S corporation items must be used, unless the shareholder disposes of the entire interest in the entity.
a. True
b. False
9. 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.
a. True
b. False
10.All tax preference items flow through the S corporation, to be included in the shareholders’ AMT calculations.
a. True
b. False
11.An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.
a. True
b. False
12.A capital loss allocated to a shareholder always reduces the Other Adjustments Account.
a. True
b. False
13.Tax-exempt income is not separately stated on Schedule K of Form 1120S.
a. True
b. False
14.A distribution from OAA is taxable.
a. True
b. False
15.An item that appears in the “Other Adjustments Account” affects stock basis, but not AAA, such as taxexempt
interest.
a. True
b. False
16.An S corporation that has total assets of at least $10 million on Schedule L at the end of the tax year must file a Schedule M-3.
a. True
b. False
17.The Schedule M-3 is the same for a C corporation and an S corporation.
a. True
b. False
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