ACCT 736 Exam 2

An S corporation has two shareholders who are also employees of the corporation. Shareholder A owns 20 shares and shareholder B owns 90 shares. The total number of shares issued and outstanding is 2,000. The corporation pays the health insurance premiums for all its employees and families. The cost of family coverage is $5,300. The corporation pays for family coverage for both shareholders. Because the company paid for health insurance, which of the following amounts would be reported to Shareholder A as his income?

$0

Bobby owns 50% of Jingles, Inc., an S corporation filing tax returns on a calendar year. For tax year 2021, the corporation has an operating loss of $15,000 and separately stated tax-exempt income of $10,000. Bobby individually loans the corporation $4,000. His basis on January 1, 2021, is $2,000. What is his basis in the stock at year end 2021?

$0

Which of the following are considered separately stated items for Form 1120-S shareholders?

All of the answers are correct.

Which of the following items are required to be separately stated to an S corporation's shareholders?

All of the answers are correct.

Salamander Corporation filed its 2021 Form 1120-S on October 10, 2022. Salamander is a calendar-year taxpayer with 10 shareholders. What amount will Salamander owe for failure to file on time?

$14,700

In computing the nonseparately stated income or loss of an S corporation, which of the following items can be deducted by the corporation?

Corporate organizational costs.

Which of the following items are not separately stated on a Schedule K-1 for an S corporation?

Salaries and wages and taxes and licenses.

Which of the following would not increase the basis of a shareholder's stock in an S corporation?

Distributions by the S corporation that were not included in the shareholder's income.

Yak Company, an S corporation, had $128,000 in losses in Year 3. On January 1, Year 3, Yak Company was owned by Felicia (40%), Fauna (35%), and Farrah (25%). Felicia sold 50% of her shares to Frank on April 1 and her remaining shares to Felix on August 1. Fauna and Farrah owned their shares in Yak Company for the entire year. Which shareholder recognizes the greatest loss for Year 3 (a non-leap year)?

Fauna.

What is B's basis in his Day Corporation stock and his basis in the indebtedness he is owed by Day Corporation at the end of Year 1?

Stock, $0; indebtedness, $0.

Sam's basis in S corporation stock was $100,000 before adjusting for current year activity. After consideration of each of the items below, what is Sam's basis in his S corporation stock?$10,000 tax-exempt income$20,000 nonseparately stated income$15,000 excess of depletion deduction over the basis of the property being depleted

$145,000

Jen and Berry were the only shareholders of Water Ice, Inc., an S corporation. On January 1, 2021, Jen owned 40 shares and Berry owned 60 shares. Jen sold her shares to Joe for $10,000 on March 31, 2021. The corporation reported a $50,000 loss at the end of 2021. How much of the loss is allocated to Joe?

$15,068

All of the following would reduce the basis of a shareholder's stock in an S corporation except a shareholder's

Pro rata share of any nonseparately stated income of the S corporation.

An S corporation is owned equally by A and B, whose respective stock bases at the beginning of the year are $12,000 and $13,000. During the year, the corporation had $100,000 in ordinary business income and $5,000 in tax-exempt income. The corporation distributed $50,000 to each shareholder for the year. What is owner B's stock basis at year end?

$15,500

On January 1, 2021, Terry purchased 50% of Halt, an S corporation, for $150,000. At the end of 2021, Halt incurred an ordinary loss of $320,000. How much of the loss can Terry deduct on his personal income tax return for 2021?

$150,000

On December 31, 2020, Mr. Hyde purchased 50% of S corporation Z's only class of stock outstanding for $150,000. On November 30, 2021, he purchased the other 50% of Z's stock for $150,000. For 2021, Z incurred an ordinary loss of $237,250. How much of the loss can Mr. Hyde deduct on his personal income tax return for 2021?

$128,700

On December 31, Year 1, Mr. Vear purchased 50% of S corporation Z's only class of stock outstanding for $100,000. Z is an electing S corporation. On November 30, Year 2, he purchased the other 50% of its stock for $100,000. For Year 2, Z Corporation had an ordinary loss of $255,500. How much of the loss can Mr. Vear deduct on his individual income tax return for Year 2?

$138,600

You own 100% of Ricochet, Inc., an S corporation, filing returns on a calendar year. For tax year 2021, the corporation has an operating loss of $11,000 and separately stated tax-exempt income of $10,000. Your basis on January 1, 2021, is $2,000. What is the basis at the end of 2021?

$1,000

Mary is the sole shareholder of Company A, Inc., an S corporation, as well as a 50% shareholder in Company B, Inc., also an S corporation. During the 2021 tax year, both companies acquired qualified assets in order to take the Sec. 179 election for the full allowable amount. Prior to the 2021 tax year, the companies had accumulated Sec. 179 deductions in the following amounts:Company A - $1,381,700Company B - $1,328,300 Calculate the maximum amount of Sec. 179 deduction Mary will be able to recognize on her personal income tax returns for the 2021 tax year.

$1,050,000

As of January 1, 2021, John is a 50% shareholder of XYZ, Inc., an S corporation, as well as a 75% shareholder of ABC, Inc., also an S corporation. Both companies are calendar-year taxpayers. Because of profitable years, each company elected to use the maximum depreciation deduction allowable under IRS Code Sec. 179 for the year. Assuming that each election was valid, what is the maximum amount of Sec. 179 deductions which can be passed through to John?

$1,312,500

Stone owns 100% of an S corporation and materially participates in its operations. The stock basis at the beginning of the year is $5,000. During the year, the corporation makes a distribution of $3,500 and passes through a loss from operations of $2,000 for the year. What loss can Stone deduct on Stone's personal tax return?

$1,500

Bow, Inc., an S corporation, has three equal shareholders. For the year ended December 31, 2021, Bow had taxable income of $300,000. Bow made cash distributions totaling $120,000 during 2021. For 2021, what amount from Bow should be included in each shareholder's gross income?

$100,000

Beech Corp., an accrual-basis, calendar-year S corporation, has been an S corporation since its inception. At the beginning of the current year, Gold owned 50% of the 100 issued shares of Beech stock, and had a $3,000 tax basis in the Beech stock. During the current year, Beech had $200,000 in net business income and $4,000 in Oak County municipal bond interest income. Beech made no distributions to its shareholders. What was Gold's tax basis in Beech stock at year end?

$105,000

XYZ Corporation is a qualified S corporation. In 2021, its books and records reflected the following transactions:Business income$500,000Real estate rental loss(20,000)Interest income5,000Salaries and wages(50,000)Depreciation (without Section 179 expense)(40,000)Section 179 expense(10,000)Other business deductions(300,000)What is XYZ's ordinary income (loss) to be reported on its 2021 Form 1120-S?

$110,000

Shiloh Corporation filed its 2021 Form 1120-S on August 16, 2022. Shiloh is a calendar-year taxpayer with 95 shareholders. What amount will Shiloh owe for failure to file on time?

$119,700

On January 1 of the first year of operation, an investor paid $10,000 for a 20% interest in Biga, an S corporation. During the same year, Biga earned $10,000 taxable income and $2,000 tax-exempt interest. Biga paid dividends totaling $1,000 to its shareholders during the same year. What is the investor's tax basis in the shares of Biga at the end of the year?

$12,200

Snail Corporation filed its 2021 Form 1120-S on February 20, 2023. Snail is a calendar-year taxpayer with 5 shareholders. What amount will Snail owe for failure to file on time?

$12,600

What is the nonseparately stated income amount of an accrual-basis, calendar-year S corporation with the following items?Gross receipts$400,000Interest income24,000Rental income50,000Cost of goods sold and commissions254,000Net long-term capital gain34,000Compensation paid to shareholder20,000

$126,000

Sabre Corporation filed its 2021 Form 1120-S on January 4, 2023. Sabre is a calendar-year taxpayer with 80 shareholders. What amount will Sabre owe for failure to file on time?

$168,000

Bern Corp., an S corporation, had an ordinary loss of $36,500 for the year ended December 31, 2021. On January 1, 2021, Meyer owned 50% of Bern's stock. Meyer held the stock for 40 days in 2021 before selling the entire 50% interest to an unrelated third party. Meyer's basis for the stock was $10,000. Meyer was a full-time employee of Bern until the stock was sold. Meyer's share of Bern's 2021 loss was

$2,000

On January 1, Year 1, Allen purchased 50% of the outstanding shares of an S corporation, Ball Enterprises, for $1,000. At year end, Ball had $5,000 in ordinary income, $1,000 in net income from rental real estate, and had made $2,000 in charitable contributions. Ball had also paid $700 to Allen's golf instructor and $300 for a titanium driver Allen uses as a member at his country club. What is Allen's basis in Ball Enterprises at the end of Year 1?

$2,000

XYZ Corporation (an S corporation) had the following items of income and deductions for 2021. Charles and Diane are equal shareholders in the corporation. They each had an adjusted stock basis of $30,000 on January 1, 2021.Gross receipts from sales$100,000Cost of goods sold50,000Depreciation10,000Charitable contributions10,000Interest income5,000Tax-exempt interest3,000Other operating costs63,000Diane received a distribution of $15,000 on June 1, 2021. Her basis on January 1, 2022, is

$2,500

Tap, a calendar-year S corporation, reported the following items of income and expense in the current year:Revenue$44,000Operating expenses20,000Long-term capital loss6,000Charitable contributions1,000Interest expense4,000What is the amount of Tap's ordinary income?

$20,000

Foster's RV Sales, Inc., is an S corporation with the following activity during 2021:Gross sales of RV's and campers$500,000Operating expenses300,000Interest income1,000Charitable contributions3,000Sec. 179 expense10,000How much ordinary income from trade or business activities will be reported on Schedule K, Shareholder's Pro Rata Items?

$200,000

An S corporation had the following income and expenses:Sales$240,000Rent expense25,000Business meals expense (not provided by a restaurant)5,000Interest income1,500Contributions to qualifying charities600Section 179 expense3,000Depreciation expense1,800What would be reported as ordinary income on the corporation's income tax return?

$210,700

Rich Corporation, an S corporation since its organization, is owned entirely by Mr. Rich. The corporation uses a calendar year as its taxable year. Mr. Rich paid $200,000 for his Rich stock when the corporation was formed on January 1, 2021. For 2021, Rich Corporation reported the following results:Ordinary income$40,000Tax-exempt bond interest income6,000Short-term capital loss(3,000)No distributions were made during 2021. What is the basis of Mr. Rich's stock on December 31, 2021?

$243,000

Scorpion Corporation filed its 2021 Form 1120-S on April 16, 2022. Scorpion is a calendar-year taxpayer with 60 shareholders. What amount will Scorpion owe for failure to file on time?

$25,200

On December 31, Year 1 (a non-leap year), Mr. and Mrs. Wise purchased 50% of Cobra's only class of stock outstanding for $300,000. Cobra is an electing S corporation. On November 30, Year 2, they purchased the other 50% of Cobra's stock for $300,000. For the year, Cobra incurred an ordinary loss of $474,500. How much of the loss can Mr. and Mrs. Wise deduct on their individual income tax return for the year?

$257,400

What is the non-separately stated income amount of a calendar-year S corporation operating on an accrual basis with the following items?Gross receipts$300,000Interest income25,000Royalty income10,000Salary paid to shareholder20,000

$280,000

Morton was the sole shareholder for PAX Trades, an S corporation, for the past 9 years. Morton is planning a semi-retirement and decided to sell some of his shares. On March 1, Year 10, Morton sold 25% of his shares to Mark and on August 31, Year 10, Morton transferred 25% of his shares to Mary. PAX had $400,000 in net income in Year 10. What amount of income from PAX should Morton report on his return for Year 10 (a non-leap year)?

$283,013

On December 31, Year 1, Walter had a $2,000 basis in Oak, Inc., an S corporation. Walter owns 50% of all outstanding Oak stock. At the beginning of Year 2, Walter contributed a patent that he had acquired for $1,000 to Oak. During Year 2, Oak received $5,000 in royalty income from that patent. Oak also received $2,500 in ordinary income (before accounting for distributions) and had $500 in Internal Revenue Code Sec. 179 deductions. At the end of Year 2, Oak returned ownership of the patent, which now had a fair market value of $5,000, back to Walter. What is Walter's basis in Oak, Inc., at the end of Year 2?

$3,500

Paige, a 25% shareholder in an S corporation, had a stock basis of $10,000 at the beginning of the year. The corporation had ordinary income of $200,000 for the year. There were no separately stated items. Paige received wages from the corporation of $25,000 and a distribution of $30,000. What was Paige's basis in the stock at year end?

$30,000

The Haas Corp., a calendar-year S corporation, has two equal shareholders. For the year ended December 31, 2021, Haas had taxable income of $60,000, which included $50,000 from operations and $10,000 from investment interest income. There were no other transactions that year. Each shareholder's basis in the stock of Haas will increase by

$30,000

Eso Corporation filed its 2021 Form 1120-S on June 10, 2022. Eso is a calendar-year taxpayer with 50 shareholders. What amount will Eso owe for failure to file on time?

$31,500

What is the nonseparately stated income amount of an accrual-basis, calendar-year S corporation with the following items?Gross receipts$100,000Interest income6,000Rental income12,500Cost of goods sold and commissions63,500Net long-term capital gain8,500Compensation paid to shareholder5,000

$31,500

Rap, Inc., was organized in January 2021 and immediately made an S election. Rap, Inc.'s stock is entirely owned by Howard, who contributed $40,000 to start the business. Rap reported the following results for the 2021 year:Ordinary income$36,000Short-term capital loss4,000Charitable contributions1,000Tax-exempt income1,000Sec. 179 deduction10,000On April 12, 2021, Howard received a $30,000 cash distribution from the corporation. What is the adjusted basis of his stock on January 1, 2022?

$32,000

A taxpayer owns 50% of the stock of an S corporation and materially participated in the corporation's activities. At the beginning of the year, the taxpayer had an adjusted basis in the stock of $25,000 and made a loan to the corporation of $13,000. During the year, $3,000 of the loan was repaid, and the taxpayer's share of the corporation's loss for the year was $40,000. What is the amount of the loss that may be deducted on the taxpayer's tax return?

$35,000

Bob's share of an S corporation loss is $50,000, and his basis in his stock on December 31, Year 1, is $25,000. He loaned the S corporation $10,000 during the year, which has not been repaid. What maximum amount of loss (before passive and at-risk limitations) can Bob deduct on his Year 1 tax return?

$35,000

What is the total amount of separately stated income of a calendar-year S corporation operating on an accrual basis with the following items:Gross receipts$300,000Interest income25,000Royalty income10,000Salary paid to shareholder20,000

$35,000

What is the total amount of separately stated income items of a calendar-year S corporation operating on an accrual basis with the following information: Net income of rental real estate activities $300,000 Interest income 25,000 Royalty income 10,000 Sec. 1231 gain (from equipment sale) 20,000 Gross receipts 700,000

$355,000

Snake Corporation filed its 2021 Form 1120-S on November 20, 2022. Snake is a calendar-year taxpayer with 20 shareholders. What amount will Snake owe for failure to file on time?

$37,800

Maui Corporation (an S corporation) reported a $72,000 ordinary loss during 2021. At the beginning of 2021, Elvis and Frank equally owned all of Maui's stock. On July 1, 2021, Frank gave one-fourth of his stock to his son, George. What amount of the 2021 loss is allocated to George?

$4,512

Graphite Corp. has been a calendar-year S corporation since its inception on January 2, 2014. On January 1, 2021, Smith and Tyler each owned 50% of the Graphite stock in which their respective bases were $12,000 and $9,000. For the year ended December 31, 2021, Graphite had $80,000 in ordinary business income and $6,000 in tax-exempt income. Graphite made a $53,000 cash distribution to each shareholder on December 31, 2021. What total amount of income from Graphite is includible in Smith's 2021 adjusted gross income?

$40,000

Mark and Mary formed MM, Inc., as an S corporation. Each contributed $50,000 in exchange for five shares of corporate stock. In addition, MM obtained a $60,000 loan from a local bank that was still outstanding at the end of the year. In MM's first year of operation, it reported a loss of $20,000 and did not make any distributions to the shareholders. What is Mark's basis in his MM shares at the beginning of the second year?

$40,000

What amount of net business income should Bole report on its 2021 Form 1120-S, U.S. Income Tax Return for an S Corporation, Schedule K?

$46,500

On Bole's 2021 S corporation Form Schedule K-1, Shareholders' Shares of Income, Credits, Deductions, etc., what amount of income should be separately stated from business income?

$5,000

Jasper owns 50% of Blaster, Inc., an S corporation filing returns on a calendar-year basis. For tax year 2021, the corporation has an operating loss of $13,000 and separately stated tax-exempt income of $10,000. Jasper's basis on January 1, 2021, is $2,000. What is his basis at the end of tax year 2021?

$500

As of January 1, 2021, Kane owned all 100 issued shares of Manning Corp., a calendar-year S corporation. On the 40th day of 2021, Kane sold 25 of the Manning shares to Rodgers. For the year ended December 31, 2021 (a 365-day calendar year), Manning had $73,000 in nonseparately stated income and made no distributions to its shareholders. What amount of nonseparately stated income from Manning should be reported on Kane's 2021 tax return?

$56,750

Greene is the sole shareholder of Seagull, a calendar-year S corporation. Greene's basis at the beginning of the year is $15,000. Seagull reported an ordinary loss of $5,000 and $2,000 of municipal bond interest for the year. Seagull distributed cash of $6,000 to Greene on November 1. What is Greene's basis in Seagull at the end of the year?

$6,000

Wanda owns 100% of S corporation, Milk Enterprises. At the beginning of 2021, she had a zero basis and an unused ordinary loss carry over from Milk Enterprises in the amount of $5,000. During the year, Wanda secured a bank loan of $10,000 on her personal residence and made a shareholder loan of that amount to Milk Enterprises. At the end of 2021, Milk Enterprises reported on its Schedule K a $1,000 ordinary loss and a $3,000 cash distribution made to Wanda. Wanda has $10,000 in flow-through reportable income from other S corporations. How much of Milk Enterprises' ordinary loss can Wanda deduct on her personal return?

$6,000 in loss.

Bill and Ken own Tax, Inc., (an S corporation) equally. In 2021, the corporation reported a $130,000 ordinary loss. Tax's liabilities at the end of 2021 included $100,000 of accounts payable, $150,000 of mortgage payable, and a $20,000 note owed to Bill. Each owner had a $40,000 adjusted basis for his stock on January 1, 2021. Compute the loss reportable by Bill.

$60,000

Este Corporation filed its 2021 Form 1120-S on July 4, 2022. Este is a calendar-year taxpayer with 75 shareholders. What amount will Este owe for failure to file on time?

$63,000

Saola Corporation filed its 2021 Form 1120-S on December 28, 2022. Saola is a calendar-year taxpayer with 30 shareholders. What amount will Saola owe for failure to file on time?

$63,000

What is the non-separately stated income amount of an accrual-basis, calendar-year S corporation with the following items? Gross receipts $200,000 Interest income 12,000 Rental income 25,000 Cost of goods sold and commissions 127,000 Net long-term capital gain 17,000 Compensation paid to shareholder 10,000

$63,000

Sunnie owns 50% of the shares of Corporation H, a calendar-year S corporation, having a basis of $7,000. She also guaranteed a corporate loan of $6,000. For the current year, H had an operating loss of $22,000. What is the amount of H's loss that Sunnie can deduct on her individual income tax return for the current year?

$7,000

Lane, Inc., an S corporation, pays single coverage health insurance premiums of $4,800 per year and family coverage premiums of $7,200 per year. Mill is a 10% shareholder-employee in Lane. On Mill's behalf, Lane pays Mill's family coverage under the health insurance plan. What amount of insurance premiums is includible in Mill's gross income?

$7,200

Samantha Corporation filed its 2021 Form 1120-S on September 30, 2022. Samantha is a calendar-year taxpayer with 5 shareholders. What amount will Samantha owe for failure to file on time?

$7,350

Magnolia Corporation, a calendar-year S corporation, was formed on January 1, Year 1. Kathy owns 25% of Magnolia's outstanding stock, which she purchased for $20,000. In Year 1, Kathy guaranteed a corporate loan for $40,000. In Year 2, Kathy made payments on the loan totaling $10,000. Magnolia had losses of $90,000 and $60,000 in Year 1 and Year 2, respectively. What is the amount of the unallowed loss that Kathy can carry over to Year 3?

$7,500

On January 1, Year 1, Mr. Karl purchased 50% of Olive, Inc., an S corporation, for $75,000. At the end of Year 1, Olive, Inc., incurred an ordinary loss of $160,000. How much of the loss can Mr. Karl deduct on his personal income tax return for Year 1?

$75,000

Evan, an individual, has a 40% interest in EF, an S corporation. At the beginning of the year, Evan's basis in EF was $2,000. During the year, EF distributed $100,000 and reported operating income of $200,000. What amount should Evan include in gross income?

$80,000

Sandy is the sole shareholder of Swallow, an S corporation. Sandy's adjusted basis in Swallow stock is $60,000 at the beginning of Year 1. During Year 1, Swallow reports the following income items:Ordinary income$30,000Tax-exempt income5,000Capital gains10,000In addition, Swallow makes a nontaxable distribution to Sandy of $20,000 during Year 1. What is Sandy's adjusted basis in the Swallow stock at the end of Year 1?

$85,000

Tracy, an owner of an S corporation, has beginning basis of $13,000 in stock of the S corporation. During the year, Tracy contributed an additional $4,000 to partially offset the share of the S corporation's net operating loss, which was $7,000 for this year. At the beginning of the year, Tracy received a $1,000 distribution from the S corporation. What was Tracy's basis at year end in the S corporation stock?

$9,000

Sabrina Corporation filed its 2021 Form 1120-S on May 18, 2022. Sabrina is a calendar-year taxpayer with 15 shareholders. What amount will Sabrina owe for failure to file on time?

$9,450

On January 1, Year 1, Bob purchased 50% of the stock of Lebeck Industries, an S corporation, for $100,000, and Bob also loaned the corporation $20,000. At the end of Year 1, Lebeck Industries incurred an ordinary loss of $180,000. How much of the loss can Bob deduct on his personal income tax return for Year 1?

$90,000

At the beginning of the current year (a non-leap year), W, an S corporation, was owned equally by two individual shareholders, D and K. During the year, W had ordinary income of $183,000, a net long-term capital gain of $91,500, and charitable contributions of $27,450. What are the amounts of ordinary income, capital gain, and charitable contribution from W's activities that D and K must each report in the current year?

$91,500 Capital Gain $45,750 Charitable Contribution $13,725

An S corporation has income of $72,000 after the following deductions:IRC Sec. 179 election to expense depreciable property$15,000Charitable contributions11,000Salary to owner who worked as CEO of corporation84,000What is the amount of nonseparately-stated income shown on the S corporation's income tax return?

$98,000

Brian sold 30% of his 1,000 S corporation shares to Clint on May 11, 15% to Alice on July 22, 15% to Derrick on August 17, and the remaining 40% to Eric on October 1. There were no other shareholders during the year. How many days of the year did Brian own more than 50% of the corporation? Assume a 365-day year.

229 days.

With regard to S corporations and their shareholders, the "at-risk" rules applicable to losses

Apply at the shareholder level rather than at the corporate level.

Bob and Sally, unmarried taxpayers, each owned 50% of Lostalot, Inc., an S corporation. The corporation had a $50,000 operating loss for the tax year ending December 31, 2021. As of December 31, 2020, Bob's basis in his stock was $15,000 and Sally's was $5,000. During the 2021 tax year, Sally mortgaged her home for $25,000 and loaned the money to the corporation. Although not personally liable, Bob told her not to worry and that if anything happened, he would help pay the mortgage debt. Calculate the amount of allowable loss deduction each shareholder would be able to recognize on their individual 2021 tax returns.

Bob: $15,000, and Sally: $25,000.

A sole proprietor wants to incorporate and has requested a projection of the first-year tax results as a C corporation and as an S corporation. Taxable income from ordinary operations is projected to be $100,000. The company expects to make a $20,000 charitable contribution (not for relief efforts) and projects a long-term capital loss on stock of $7,000. Which of the following projections is correct?

C corporation, $80,000 taxable income; S corporation, $100,000 ordinary business income; remaining items are separately stated.

Which of the following would not increase the basis of a shareholder's stock in an S corporation?

Capital gains tax paid by the shareholder.

Mary is a 50% shareholder in an S corporation, which suffered a $100,000 loss for the tax year ending December 31, Year 1. Mary's basis in her stock as of December 31, Year 1, was $25,000. What can Mary do with the disallowed loss of $25,000?

Carry forward the loss indefinitely for use if her basis in her stock is sufficiently restored.

An S corporation may deduct

Compensation of officers.

What amount of Day's losses may be deducted by B in Year 1, and what amount of Day's losses can be carried over by B to Year 2?

Deducted, $13,000; carryover, $5,250.

Which of the following items is not a separately stated item for Form 1120-S shareholders?

Depreciation.

Which of the following items must be separately stated on Form 1120-S, U.S. Income Tax Return for a Corporation, Schedule K-1?

Gain or loss from the sale of collectibles.

All of the following are separately stated items for an S corporation except

Income from trade or business.

Fun Corporation, an S corporation since its organization, is owned entirely by Ms. F. The corporation uses a calendar year as its taxable year. Ms. F paid $250,000 for her Fun stock when the corporation was formed on January 1 of the current year (a non-leap year). For the current year, Fun reported the following results: Ordinary income $50,000 Tax-exempt bond interest income 12,000 Long-term capital gains 17,000 Short-term capital loss (4,000) No distributions were made during the year. Ms. F's addition to her gross income because of her Fun stock ownership and her basis for the Fun stock on December 31 of this year are

Income, $63,000; basis, $325,000.

Which of the following items is not a separately stated item of a qualifying S corporation?

Interest expense on business operating loans.

On January 1, Year 1, Acme, Inc., a calendar-year S corporation, was owned by four individuals as follows: John, 50%; Bob, 25%; Dave, 20%; and Tom, 5%. On March 31, Year 1, John sold his shares to Bob. On the same day, Dave sold his shares to Tom. For the tax year ending December 31, Year 1, Acme realized an operating loss of $100,000. Assuming that all four had sufficient basis in their stock, calculate each shareholder's recognizable loss for the Year 1 tax year. To assist in the calculation, assume a 360-day calendar year, with 30 days in each month.

John, $12,500; Bob, $62,500; Dave, $5,000; and Tom, $20,000.

New Lots Corporation began business operations as an S corporation in 2018. New Lots files its 1120-S returns on a calendar-year basis. The current year is 2021. The corporation's taxable income and capital gains and losses for the years of operation are as follows: 2018201920202021Capital gains$2,000$ 6,000$7,000$ 4,000Capital losses000(21,000)Taxable income (loss)3,000(12,000)4,0004,000What is the amount of capital loss that is available to New Lots Corporation for carryback from 2021?

None of the answers are correct.

Which of the following will not affect a shareholder's basis in his or her S corporation stock?

None of the answers are correct.

Absent an election to close the books, the allocation of nonseparately stated income or loss for an S corporation shareholder that changed his ownership interest during the year is computed based on which of the following ownership percentages?

Ownership percentage computed on a per-share per-day basis.

For which of the following entities is the owner's basis increased by the owner's share of profits and decreased by the owner's share of losses but not generally affected by the entity's bank loan increases or decreases?

S corporation.

Mr. Star has a $100,000 basis in the stock of an S corporation. Which of the following items will not decrease his basis in the stock?

The amount of the deduction for depletion that is more than the basis of the property being depleted.

The two equal shareholders of a C corporation are thinking of filing an election to have the company treated as an S corporation. Which of the following consequences is an advantage of this election?

The corporation's capital losses can be claimed on the tax returns of the shareholders.

Which of the following would not reduce a shareholder's basis in S corporation stock?

The excess of the corporation's deductions for depletion over the basis of the property subject to depletion.

Towne Corporation was owned entirely by individual X until October 1 of the current year, at which time X sold X's entire stockholdings to individual Y. During the year, Towne reported ordinary income of $146,000. It made a $30,000 cash distribution to X on July 1 of the current year. How much income should be reported by individuals X and Y in the current year as a result of Towne Corporation's activities, assuming a valid S corporation election has been in effect at all times since its inception?

X, $109,600; Y, $36,400.

A shareholder's basis in the stock of an S corporation is increased by the shareholder's pro rata share of income from

Yes Taxable Interest Yes