Regulation 3 PassMaster Questions

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Unformatted text preview: stockholders' bases: Current and accumulated earnings and profits Less: Non-liquidating cash distribution Reduction in bases of shareholders CPA-02258 Type1 M/C 127. CPA-02258 A-D Nov 89 II #50 $ 825,000 (1,500,000) ($ 675,000) Corr Ans: D PM#33 R 3-99 Page 48 With regard to S corporations and their stockholders, the "at risk" rules applicable to losses: a. b. c. d. Depend on the type of income reported by the S corporation. Are subject to the elections made by the S corporation's stockholders. Take into consideration the S corporation's ratio of debt to equity. Apply at the shareholder level rather than at the corporate level. CPA-02258 Explanation Choice "d" is correct. The "at risk" rules apply at the shareholder level rather than at the corporate level. Rule: The "at risk" rules limit the deductibility of the distributive share of the losses of an S corporation to the amount the taxpayer has "at risk" (as opposed to non recourse loans) and could actually lose from an activity. Choice "a" is incorrect. The character (type) of an S...
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.

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