CHAPTER22QUIZ - S Corporations 22-1 CHAPTER 22 S...

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22-1 CHAPTER 22 S CORPORATIONS EXAMINATION QUESTIONS ____ 1. An S corporation is allowed to own wholly owned S corporation subsidiaries. ____ 2. If a resident alien shareholder moves outside the U.S., the S election will be terminated. ____ 3. An S corporation’s AAA cannot have a negative balance. ____ 4. Any excess of losses or deductions over both stock and debt basis is lost. ____ 5. An S corporation may not issue § 1244 stock. 6. During 2006, an S corporation incurs the following transactions. Net income from operations $85,000 Interest income from savings account 26,000 Long-term capital gain from sale of securities 25,000 Short-term capital loss from sale of securities 10,000 The corporation's passive investment income for 2006 is: a. $26,000. b. $41,000. c. $51,000. d. $136,000. e. None of the above. 7. During 2006, Lunar Corporation incurs the following transactions. Net income from operations $140,000 Long-term capital gain from sale of securities 55,000 Short-term capital loss from sale of securities 23,000 Lunar maintains a valid S election and does not distribute any dividends to its sole shareholder, Christy. As a result, Christy must recognize: a. Ordinary income of $140,000 and long-term capital gain of $32,000. b. Ordinary income of $140,000, long-term capital gain of $55,000, and $23,000 short-term capital loss. c. Ordinary income of $140,000, long-term capital gain of $55,000, and $3,000 short-term capital loss. d. Ordinary income of $140,000. e.
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CHAPTER22QUIZ - S Corporations 22-1 CHAPTER 22 S...

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