S-Corporations - Ch12

S-Corporations- - CHAPTER 12 S CORPORATIONS SOLUTIONS TO PROBLEM MATERIALS Question Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

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CHAPTER 12 S CORPORATIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 1 Issue recognition Unchanged 1 2 Ethics problem Unchanged 2 3 Shareholder limit Unchanged 3 4 Ethics problem Unchanged 4 5 Issue recognition Unchanged 5 6 Nonseparately computed income Unchanged 6 7 Subchapter S taxable income Unchanged 7 8 Non-separately computed income Unchanged 8 9 Distributions Unchanged 9 10 Distributions Unchanged 10 11 Distributions Unchanged 11 12 Distributions Unchanged 12 13 Stock basis/AAA New 14 Stock basis Unchanged 14 15 Loss allocation New 16 AAA/stock basis/AEP New 17 Issue recognition Unchanged 17 18 Property distributions Unchanged 20 19 Property distributions Unchanged 21 20 Stock basis/AAA/S income Unchanged 22 21 NOL and suspended loss Unchanged 25 22 NOL and suspended loss Unchanged 26 23 Built-in gains tax Modified 27 24 Postelection termination period Unchanged 28 25 Per-books election for short year Unchanged 29 26 Section 1244 stock Unchanged 30 27 Built-in gains tax Unchanged 32 28 Passive income tax Unchanged 33 12-1 Status: Q/P
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12-2 2003 Entities Volume/Solutions Manual Question/ Present in Prior Problem Topic Edition Edition 29 Passive income tax Unchanged 34 30 Issue recognition Unchanged 35 31 C-corporation NOL and S election Unchanged 36 32 Passive losses Unchanged 37 Comprehensive Tax Return Problem 33 Prepare Form 1120S and Schedule K-1 Unchanged 38 for one shareholder Bridge Discipline Problem 1 State requirements for S corporations Unchanged 1 Research Problem 1 The S election Unchanged 1 2 Second class of stock Unchanged 2 3 Self-employment tax Unchanged 3 4 Internet activity Unchanged 4 5 Internet activity Unchanged 5 6 Internet activity Unchanged 6 PROBLEM MATERIAL 1. The two shareholders will have difficulty making the S election effective for 2002. For the election to be effective as of January 1, 2002, the previous shareholder also must consent to the election. Under § 1362(b)(2)(B)(ii), where any shareholder who owns stock at the beginning of the tax year for which the election is effective, but not on the date of the election, does not consent to the election, the election is effective as of the nex t taxable year. Even if the previous shareholder does consent, this previous shareholder is not a qualified shareholder (i.e., a nonresident alien). Thus, the S election is effective for 2003 (but not for 2002). pp. 12-7 and 12-8 2. Extortion by one of the shareholders is certainly a despicable act. However, assuming there are no written prohibitions in the shareholder agreements prohibiting such payments, Burt has the right to sell stock to a nonresident alien. This situation illustrates the need for an S corporation to be careful in choosing shareholders. All shareholders should sign a statement indicating that the stock first will be offered to the corporation. Likewise, each shareholder should agree not to sell stock shares to a nonqualified shareholder, subject to a cause of action for damages. p. 12-7
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This note was uploaded on 01/24/2010 for the course ACCT 44 taught by Professor Smithysmith during the Spring '10 term at DeVry Chicago.

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S-Corporations- - CHAPTER 12 S CORPORATIONS SOLUTIONS TO PROBLEM MATERIALS Question Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

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