C12-Chp-12-2-Homework-Prb-S-Corporations

C12-Chp-12-2-Homework-Prb-S-Corporations -...

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30f54a21094d2c7d906de8026f1882d4864dc8be.doc. Page 1 of 6 First Name______________________________Last Name: _________________________________ Home work-Chapter 12. Turn in your answer sheet at the start of class. (35 @ 3 Pts. = 105 = 105) 1 [Pg. 12-4, 31, §1363, 1366] Jan is married and files a joint return. The joint return does not have unusually large personal deductions. The joint return does not contain substantial amounts of income other than the income from the business described below. Jan operates an unincorporated office supply business that has the following income statement each year: Sales $1,000,000 Operating expenses 900,000 Net income $ 100,000 Jan is considering incorporating the business. If the business is incorporated, she will draw a salary of $50,000, and the corporation will not pay dividends. Retained earnings will be reinvested in additional warehouse space and delivery equipment. The corporation is not expected to have surplus funds in the forseeable future. Which of the following organizational forms is likely to result in the lowest total income tax burden? a . Proprietorship b. Corporation without S election c. Corporation with S election 2 [Pg. 12-33] Which entity is likely to face an IRS challenge because of allegedly unreasonably low salaries? a . C corporation b. S corporation c. Proprietorship 3 [Pg. 12-33] If the IRS audits an S corporation and questions the level of compensation to the CEO and owner of the corporation, the IRS is likely to consider the compensation to be a. Unreasonably high b. Unreasonably Low c. Neither 4 [Pg. 12-2, §1363] A business operated as a C corporation from 1990 through 12-31-2006, and had accumulated earnings and profits of $100,000 at 12-31-2006. The corporation did not use LIFO. The corporation elected S status as of 1-1-2007. During 2007, the corporation had net ordinary business income from its pest control operations of $800,000. The company did not sell any assets in 2007. How much tax is owed by the corporation for 2007? a. $0 b. $35,000 c. $280,000 d. none of these 1 Explain the requirements for being taxed under Subchapter S. 5 [Pg. 12-5, §1361] A corporation may elect to be an S corporation if it meets the following tests: a. It is a domestic corporation. b. It has no more than 100 shareholders. c. It has only one class of stock. d. All of these. 2 Explain the procedures for electing to be taxed under Subchapter S. 6 [Pg. 12-6, §1362] Acme Corporation wishes to be treated as an S Corporation for the year ending December 31, 2009. The corporation must file Form 2553 before what date? a. 12- 31-2008 b. 3-15-2008 c. 3-15-2009 d. 12-31-2009
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30f54a21094d2c7d906de8026f1882d4864dc8be.doc. Page 2 of 6 3 Identify the events that will terminate an S election. 7
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C12-Chp-12-2-Homework-Prb-S-Corporations -...

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