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Posted by: Christian
Price Quoted by Student: $12
Posted On: 2011-09-30 03:03:44
 
Question

CHAPTER 12  S CORPORATIONS. MULTIPLE CHOICE

 

1.         During 2006, an S corporation incurs the following transactions.

 

                   Net income from operations     $50,000

            Interest income from savings account                                                          28,000

            Long-term capital gain from sale of securities                                               74,000

            Short-term capital loss from sale of securities                                              64,000

 

The corporation's passive investment income for 2006 is:

a.       $28,000.

b.       $38,000.

c.       $102,000.

d.       $152,000.

e.       None of the above.

2.         During 2006, Galaxy Corporation incurs the following transactions.

 

                Net income from operations $110,000

              Long-term capital gain from sale of securities 43,000

                   Short-term capital loss from sale of securities 23,000

Galaxy maintains a valid S election and does not distribute any dividends to its sole shareholder, Peter.  As a result, Peter must recognize:

a.       Ordinary income of $110,000 and long-term capital gain of $20,000.

b.         Ordinary income of $110,000, long-term capital gain of $43,000, and $23,000 short-term capital loss.

c.                   Ordinary income of $110,000, long-term capital gain of $43,000, and $3,000 short-term capital loss.

d.       Ordinary income of $110,000.

e.       None of the above.

 

3.         During the year, an S corporation incurs a $100,000 net operating loss.  Maggie, the sole shareholder, has a $65,000 stock basis, and there is a $75,000 balance in AAA at the beginning of the year.  Which statement is correct?

a.         Maggie may show a $100,000 loss deduction on her Form 1040.

b.         At the end of the year, there is a zero basis in both Maggie’s stock basis and the AAA.

c.         At the end of the year, Maggie has a zero basis in the stock, and there is a negative $25,000 balance in the AAA.

d.         Maggie may deduct $75,000 of the loss.

e.         None of the above statements is correct.


 

4.         Lunar, Inc., a calendar year S corporation, has an operating loss of $140,000 and a long-term capital loss of $40,000.  Wren, an individual, owns 30% of the corporate stock and has a $60,000 basis in the stock.  What is the amount of the NOL that flows through to Wren?

a.       $12,000.

b.       $46,667.

c.       $54,000.

d.       $60,000.

e.       None of the above.

 

5.         An S corporation has a recognized built-in gain of $250,000 and taxable income of $150,000 determined using C corporation rules.  It holds a $50,000 net operating loss carry forward from a C corporation year.  There are no earnings and profits from C corporation years.  The built-in gains tax liability is:

a.       $35,000.

b.       $52,500.

c.       $70,000.

d.       $87,500.

e.       Some other amount.

 

6.         A cash basis calendar year C corporation holds $200,000 of accounts receivable on the date of its conversion to an S corporation on February 14.  By the end of the year, $120,000 of these receivables are collected.  Calculate any built-in gains tax, assuming that there is sufficient taxable income.

a.       $0.

b.       $35,000.

c.       $42,000.

d.       $70,000.

e.       None of the above.

 

7.         A cash basis calendar year C corporation holds $140,000 of accounts receivable on the date of its conversion to an S corporation on February 14.  By the end of the year, $115,000 of these receivables are collected.  Calculate any built-in gains tax, assuming that the S corporation reports $60,000 taxable income.

a.       $0.

b.       $21,000.

c.       $40,250.

d.       $49,000.

e.       None of the above.

 

8.         Excess net passive income of an S corporation is $70,000 and its taxable income is $60,000.  Assuming that there is $80,000 of accumulated earnings and profits from a C corporation year, calculate any passive income penalty tax.

a.       $0.

b.       $21,000.

c.       $24,500.

d.       $28,000.

e.       None of the above.

 

9.         Excess net passive income of an S corporation is $80,000 and taxable income is $100,000.  Assuming that there is $150,000 of accumulated earnings and profits from a C corporation year, calculate any passive income penalty tax.

a.       $0.

b.       $28,000.

c.       $35,000.

d.       $52,500

e.       None of the above.

 

10.       When Caleb dies, he owns 100% of the stock of an S corporation, with an adjusted basis of $300,000 and FMV of $500,000.  The adjusted basis and FMV of the assets, all of which are capital, of the S corporation are the same amounts.  Caleb’s son inherits all of the stock, but does not wish to continue the business.  Therefore, the S corporation sells the assets, resulting in a $200,000 gain and liquidates.  Assuming the son has a marginal tax rate of 30%, what taxes are due?

a.       $0.

b.       $60,000.

c.       $90,000.

d.       $150,000.

e.         None of the above.


Solutions
MULTIPLE CHOICE   1.    
Price $12
Attachment 1: S. Corporation. During 2006.doc
Solution Posted By: Christian    Posted on: 30-09-2011