ACCT 424 midterm 4 page

ACCT 424 midterm 4 page - 1. Question:

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1. Question: (TCO 8) Which, if any, of the following can be eligible shareholders of an S  corporation? Your Answer: A child, age 10. A resident alien. A voting trust. An estate of a deceased shareholder. All of the above can own stock CORREC T Instructor Explanation: Points Received: 4 of 4 Comments: 2. Question: (TCO 8) Which statement is incorrect? Your Answer: S corporations are treated as corporations under state law. S corporations for tax purposes are treated as partnerships. CORRECT ANSWER Distributions of appreciated property are taxable to the S corporation. The accumulated earnings tax does not apply to an S corporation. None of the above. INCORRECT Points Received: 0 of 4 Comments: 3. Question: (TCO 8) What statement is correct with respect to an S corporation? Your Answer: There are now more LLCs than S corporation. S corporation status allows shareholders to realize tax benefits from corporate losses immediately. CORREC T An S corporation is prohibited from being a member of an affiliated group. An LLP may own stock in an S corporation. None of the above. Points Received: 4 of 4 Comments: 4. Question: (TCO 8) During 20x2, Houston Nutt, the sole shareholder of a calendar year S  corporation, received a distribution of $16,000.  On December 31, 20x1, his stock  basis was $4,000.  The corporation earned $11,000 ordinary income during the year.   It has no accumulated E & P.  Which statement is correct?
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Your Answer: Nutt recognizes a $1,000 LTCG. CORREC T Nutt’s stock basis will be $2,000. Nutt’s ordinary income is $15,000. Nutt’s return of capital is $11,000. None of the above. Instructor Explanation: $11,000 ordinary income; $15,000 return of capital, $1,000 capital gain.  Nutt’s stock  basis is increased by the $11,000 ordinary income allocable to him, giving a basis of  $15,000 before the distribution.  The first $15,000 of the distribution is a return of  capital, reducing the stock basis to zero.  The remaining $1,000 constitutes capital  gain (the excess over stock basis).   Points Received: 4 of 4 Comments: 5. Question: (TCO 8) Which, if any, of the following items has  no effect  on the stock basis of an S  corporation shareholder? Your Answer: Operating income. Long-term capital gain. Cost of goods sold. Short-term capital loss. All of the above affect stock basis. CORREC T Instructor Explanation: Options a. and b. increase stock basis, and options c. and d. are stock basis  decreases.   Points Received: 4 of 4 Comments: 6. Question:
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ACCT 424 midterm 4 page - 1. Question:

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