CHAPTER 20--CORPORATIONS AN

True 49 on march 9 2010 all of the shareholders of

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TRUE 49. On March 9, 2010, all of the shareholders of Kingfisher Corporation (a calendar year entity) voluntarily revoke the S election (effective as soon as possible). For all of 2010, Kingfisher Corporation will still be an S corporation. FALSE 50. The taxable income (or loss) of an S corporation is allocated to each shareholder on a per-share and per-day of stock ownership basis. TRUE 51. In computing the taxable income (or loss) of an S corporation, a domestic production activities deduction (DPAD) is allowed. FALSE 52. In computing the taxable income (or loss) of an S corporation, an NOL carryover from a prior year is not allowed. TRUE 53. Examples of separately stated items of an S corporation include charitable contributions. TRUE 54. Darlene, a 30% shareholder in a calendar year S corporation, sells her stock on June 9, 2010. If the corporation has an operating loss for 2010, none of this loss can be claimed by Darlene because she was not a shareholder as of December 31, 2010. FALSE 55. A shareholder’s basis in the stock investment in an S corporation isreduced by a cash distribution from the corporation. TRUE 56. An S corporation makes a $20,000 cash distribution to a shareholder whose basis in the stock is $19,000. The distribution will result in a negative basis in the stock. FALSE 57. If a shareholder in an S corporation makes a loan to the corporation, this increases the basis in his stock investment. FALSE 58. Partnerships are notconsidered to be separate taxable entities and, consequently, avoid taxation at the entity level. TRUE 59. Like S corporations, partnerships serve as conduits for their owners. TRUE 5
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60. Since partnerships are not subject to income tax, they are not required to file income tax returns. FALSE 61. Various elections are made by a partnership (e.g., choice of accounting methods) even though a partnership is not considered a separate taxable entity for some purposes. TRUE 62. If property contributed to a partnership is subject to a liability (assumed by the partnership), gain is recognized to the contributing partner to the extent of the liability. FALSE 63. If a partnership interest is received in exchange for services rendered, ordinary income must be recognized by the recipient of the capital interest. TRUE 64. A contributing partner’s basis in a partnership interest received is the sum of money contributed, plus the basis of any other property transferred to the partnership. TRUE 65. Changes in the liabilities (trade accounts payable, bank loans, etc.) of a partnership will affect the basis of a partnership interest. TRUE 66. A partner’s basis in the partnership interest is increased by his or her share of the capital losses incurred by the partnership. FALSE 67. A partner’s basis in the partnership interest is increased by his or her share of the tax-exempt income received by the partnership.
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  • Spring '12
  • honig
  • Corporation, Income tax in the United States, C CORPORATION

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