CHAPTER22REVIEWQUESTIONS-1 - CHAPTER 22 S CORPORATIONS...

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CHAPTER 22 S CORPORATIONS TRUE/FALSE 1. S corporations are treated as partnerships under state laws. ANS: F REF: p. 22-2 2. Liabilities affect the owner’s basis differently in an S corporation versus a partnership. ANS: T REF: p. 22-2 3. An S corporation cannot incur a tax liability at the corporation level. ANS: F REF: p. 22-2 4. Distributions of appreciated property by an S corporation are not taxable to the entity. ANS: F REF: p. 22-3 5. Where the S corporation rules are silent, C corporation provisions apply. ANS: T REF: p. 22-3 6. More S corporation returns are filed than C corporation returns. ANS: T REF: p. 22-3 7. S corporation status allows shareholders to realize tax benefits from corporate losses immediately (assuming sufficient stock basis). ANS: T REF: p. 22-4 8. NOL carryovers for C years can be used in an S corporation year. ANS: F REF: p. 22-4 22-1
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S Corporations 22-2 9. Tax-exempt income at the S level loses its special tax treatment for the shareholder. ANS: F REF: p. 22-4 10. An estate may be a shareholder of an S corporation. ANS: T REF: p. 22-5 11. Most limited liability partnerships can own stock in an S corporation. ANS: F REF: p. 22-7 12. Most IRAs can own stock in an S corporation. ANS: F REF: p. 22-7 13. An S corporation can be a shareholder in another corporation. ANS: T REF: p. 22-7 14. If a resident alien shareholder moves outside the U.S., the S election is terminated. ANS: T REF: p. 22-7 15. An S election is made on Form 2550. ANS: F REF: p. 22-8 16. An S election made before becoming a corporation is valid the next 22-month tax year. ANS: F REF: p. 22-8 17. For a new corporation, a premature S election may not be effective. ANS: T REF: p. 22-8 18. Only 51% of the shareholders must consent to an S election. ANS: F REF: p. 22-9 19. Persons who were shareholders during any part of the year before the election date, but were not shareholders when the elction was made, also must consent to the election. ANS: T REF: p. 22-9
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S Corporations 22-3 20. The termination of an S election occurs on the day after a corporation ceases to be a small business corporation. ANS: F Termination occurs on that day. PTS: 1 REF: p. 22-10 21. Passive investment income includes gains from the sale of securities. ANS: T REF: p. 22-11 22. An S corporation may not amortize organization expenses. ANS: F REF: p. 22-11 23. Tax-exempt income at the corporate level does flow through to the shareholders. ANS: T REF: Figure 22-1 24. The pro rata method assigns an equal amount of each of the S corporation items (e.g., LTCG) to each day of the year. ANS: T REF: p. 22-13 25. An S corporation’s AAA cannot have a negative balance. ANS: F REF: p. 22-17 26. An S corporation with earnings and profits can make a taxable dividend distribution by making a AAA bypass election. ANS: T
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This note was uploaded on 12/12/2010 for the course ACCT 443 taught by Professor Molberg during the Spring '10 term at Minnesota State University Moorhead .

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CHAPTER22REVIEWQUESTIONS-1 - CHAPTER 22 S CORPORATIONS...

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