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Multiple Choice Quiz
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1
C corporations offer greater legal protection to owners than S corporations.
A)True
B)False
2
An S corporation may have only two classes of stock.
A)True
B)False
3
Sharon owns 79 percent of ABC, Inc. (an S corporation) and would like to terminate its S corporation status. Jason, who is a 5-percent owner, does not want to terminate the S corporation status. Sharon cannot terminate the election without Jason's permission.
A)True
B)False
4
Unlike partnerships, S corporations determine their accounting periods and make accounting method elections at the shareholder level.
A)True
B)False
5
An S corporation is generally restricted to the calendar year end to mitigate tax deferral.
A)True
B)False
6
Unlike partnerships, an S corporation shareholder's basis is static and is not subject to periodic adjustments.
A)True
B)False
7
An S corporation's accumulated adjustments account (AAA) may have a negative balance.
A)True
B)False
8
Juke, an S Corporation, distributes a parcel of land to Shannon, one of its shareholders. The land has a basis of $10,000 and a fair market value of $20,000. This distribution will cause Shannon to recognize a share of the deemed gain.
A)True
B)False
9
Which of the following cannot be an S corporation shareholder?
A)Feast, Inc., a corporation created by sisters, Babette and Fantine
B)Fantine, Babette's sister (and roommate), a naturalized citizen of the United States
C)Babette, a citizen of France who resides in Vermont
D)51 unrelated individuals.
10
Suppose Molly formed a C corporation, Maple Corp. in 2013 with a calendar tax year and made an S election on March 10, 2013 with the consent of Maple Corp.'s shareholders: Molly, Wendy, and Jesse (all unrelated individuals). When is the S election effective?
A)January 1, 2013.
B)March 10, 2013.
C)January 1, 2014.
D)March 10, 2014.
E)Never.
11
If Harry and Kerry (each a 35-percent shareholder) file a revocation on April 14, 2013 to terminate their S corporation's Selection, what is the effective date of the S corporation termination (assuming they do not specify one)? The S corporation has a calendar year end.
A)January 1, 2013
B)April 14, 2013
C)January 1, 2014
D)April 14, 2014
E)None of the above
12
Assume Carin sells her 30-percent interest in Blue S Corp, Inc. to Cami on January 16, 2013. Using the daily allocation method, how much income does Carin report if Blue earned $20,000 from January 1 to January 15 and a total of $500,000 from January 1 through December 31, 2013 (assume 365 days)?
A)$6,000
B)$6,164
C)$20,000
D)None of the above
13
Janessa contributed $10,000 of cash and land with a fair market value of $70,000 and an adjusted basis of $50,000 to Study Abroad, Inc. (an S corporation) when it was formed. The land was encumbered by a $20,000 mortgage executed two years before. What is Janessa's tax basis in Study Abroad after formation?
A)$20,000
B)$40,000
C)$60,000
D)$80,000
14
Typing, Inc. has been an S corporation since its inception. On July 4, 2013, Typing distributed $50,000 to Jerusha. Her basis in Typing stock on January 1, 2013, was $35,000. For 2012, she was allocated $6,000 of ordinary income from Typing and no separately stated items. What is the amount of income Jerusha recognizes related to Typing in 2013?
A)$6,000
B)$9,000
C)$15,000
D)$50,000
E)None of the above
15
At the beginning of the year, Oak Corp. (an S corporation) had $50,000 in its AAA, $30,000 of earnings and profits from prior C corporation years. During the year, Oak earned $25,000 of ordinary income and paid $100,000 in distributions to its shareholders. Assume that Ethan owns 25% of Oak Corp. his basis in Oak Corp. stock at the beginning of the year is $5,000, and his share of the distribution was $25,000. How much income does Ethan recognize this year from these transactions?
A)$0.
B)$6,250.
C)$7,500.
D)$20,000.
E)None of the above.





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