Question 1

An S corporation cannot be a partner in a partnership.

Accepted Answer

The answer of An S corporation cannot be a partner...

Question 2

In computing the taxable income (or loss)of an S corporation,a domestic production activities deduction (DPAD)is not allowed.

Accepted Answer

This statement is true. S corporations are not eligible to claim the domestic production activities deduction (DPAD) on their tax returns. The DPAD is a tax incentive for businesses that engage in certain domestic production activities, and it is only available to sole proprietorships, partnerships, LLCs, and C corporations.

Question 3

Pursuant to a complete liquidation,a corporation sells its assets to third parties and distributes the cash proceeds to its individual shareholders.As a result of the sales,the corporation must recognize both realized gains and losses.

Accepted Answer

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Question 4

If the shareholders of a calendar year C corporation elect S status on Thursday,March 15,2012,the election is effective for all of 2012.

Accepted Answer

The S corporation election is effective for the entire year in which it is made, as long as it is made by the 15th day of the third month of that year (March 15 for calendar year corporations). Therefore, if the election is made on March 15, 2012, it will be effective for the entire year of 2012.

Question 5

If a subsidiary is liquidated under § 332,no gain or loss is recognized to the parent company.

Accepted Answer

According to § 332 of the Internal Revenue Code, if a subsidiary is liquidated, no gain or loss is recognized to the parent company.

Question 6

In computing the taxable income (or loss)of an S corporation,an NOL carryover from a prior year is allowed.

Accepted Answer

The answer of In computing the taxable income (or loss)of...

Question 7

Examples of separately stated items of an S corporation include charitable contributions.

Accepted Answer

Charitable contributions made by an S corporation are separately stated items that flow through to the shareholders' personal tax returns.

Question 8

Like regular dividends,constructive dividends must be distributed to a corporation's shareholders on a pro rata basis.

Accepted Answer

Constructive dividends are not actual dividends but deemed distributions of corporate assets or income to shareholders, often in the form of personal benefits or loans. They do not have to be distributed on a pro rata basis to all shareholders like regular dividends.

Question 9

An S corporation makes a $20,000 cash distribution to a shareholder whose basis in the stock is $19,000.The distribution will result in a $1,000 negative basis in the stock.

Accepted Answer

If the shareholder's basis in the stock is $19,000 and a $20,000 cash distribution is made, the shareholder's basis in the stock cannot become negative. The shareholder would simply recognize a $1,000 capital gain on the distribution.

Question 10

On March 9,2012,all of the shareholders of Kingfisher Corporation (a calendar year entity)voluntarily revoke the S election (effective as soon as possible).For all of 2012,Kingfisher Corporation will be a C corporation.

Accepted Answer

The shareholders can voluntarily revoke the S election at any point during the calendar year. Once the S election is revoked, the corporation will be treated as a C corporation for tax purposes for the entire year.

Question 11

Darlene,a 30% shareholder in a calendar year S corporation,sells her stock on June 8,2012.If the corporation has an operating loss for 2012,none of this loss can be claimed by Darlene because she was not a shareholder as of December 31,2012.

Accepted Answer

The statement is incorrect. The operating loss for an S corporation is allocated to its shareholders based on the percentage of ownership during the year. Therefore, Darlene would be entitled to claim her portion of the operating loss for the portion of the year in which she was a shareholder (January to June 8th).

Question 12

The individual shareholder of a corporation being liquidated will not have to recognize any gain if the corporation has no E & P (either current or accumulated).

Accepted Answer

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Question 13

Because both are taxed at rates applicable to net long-term capital gain,it does not matter whether a stock redemption is treated as a sale or exchange or as a dividend.

Accepted Answer

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Question 14

If a corporation has no E & P,its shareholders will not have constructive dividends.

Accepted Answer

Constructive dividends are dividends that are not actually distributed as cash or property, but are treated as such for tax purposes. However, for a corporation to have constructive dividends, it must first have earnings and profits (E&P). If a corporation has no E&P, its shareholders will not have constructive dividends.

Question 15

Under the general rule,a parent corporation's basis in the assets received from a liquidated subsidiary is the basis the parent has in the stock of the subsidiary.

Accepted Answer

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Question 16

In order to voluntarily revoke an S election,all of the shareholders must consent to the revocation.

Accepted Answer

While shareholder consent is needed to make an S election, revoking an S election can be done by the corporation without shareholder consent. However, if the corporation wants to revert back to S status within five years after revocation, all shareholders who were shareholders at the time of the revocation must consent to the reinstatement of S status.

Question 17

The taxable income (or loss)of an S corporation is allocated to each shareholder on a per-share and per-day of stock ownership basis.

Accepted Answer

The taxable income (or loss) of an S corporation is allocated to each shareholder on a per-share and per-day of stock ownership basis. This means that each shareholder's share of the income or loss is determined based on their percentage of stock ownership and the number of days they owned the stock during the year.

Question 18

Satisfying the definition of a small business corporation is no longer necessary once the S election is initially made.

Accepted Answer

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Question 19

Under certain circumstances,an S corporation can have more than 100 shareholders.

Accepted Answer

An S corporation can have more than 100 shareholders if all members of a family are counted as one shareholder. Additionally, some types of trusts and tax-exempt organizations can also be shareholders, bringing the total number of shareholders above 100.

Question 20

Robin Corporation,a calendar year S corporation,issues some of its stock to a nonresident alien on March 5,2012.Robin becomes a C corporation as of March 5,2012.

Accepted Answer

The change in Robin Corporation's tax status from an S corporation to a C corporation would not affect the nonresident alien's ownership of the stock. Therefore, the statement is true.

Quiz 20: Corporations and Partnerships