Question

During the current year, Marlene, Nancy and Olive formed a new S Corporation. Solely in exchange for stock, Marlene and Nancy contributed appreciated property, while Olive contributed services. The exchanges of Marlene and Nancy will be nontaxable if:

		Olive receives 30% of the stock
		Olive receives 80% of the stock
		Olive receives 15% of the stock
		Marlene and Nancy together receive 50% of the stock

In June of 2018, Alice acquired her only machine for $30,000 to use in her business. The machine is classified as 5-year property. Alice’s maximum depreciation (including bonus) on the machine this year is:

		$30,000
		$12,000
		$6,000
		$18,000

Cactus Corporation, an S Corporation, had accumulated earnings and profits of $200,000 at the beginning of the tax year. Tex and Shirley each own 50% of the stock. During the current year Cactus had $100,000 of ordinary income and distributed $10,000 to Tex and $10,000 to Shirley. What is Tex's taxable income for the current year?

		$10,000
		$0
		$100,000
		$50,000

Bristol Corporation was formed as an S Corporation on January 1, 2014 and elected S corporation status at that date. Bristol has had the same 25 shareholders throughout its existence and has one class of stock. Bristol's S election will terminate if it:

		10% of the shareholders vote to revoke the election
		to purchase 10 shares
		Allows a variation in the voting rights of the stock
		Increases the number of shareholders to 125

On February 10, 2018, Ace Corporation, a new calendar year corporation, elected S corporation status and all shareholders consented to the election. There was no change in its shareholders during the current year. Ace met all eligibility requirements for an S corporation during the preelection portion of the year. What is the earliest date on which Ace can be recognized as an S corporation?

		February 10, 2018
		January 1, 2019
		February 10, 2019
		January 1, 2018

In March of 2017 Frederick acquired an passenger automobile for $45,000 and used the automobile 85% for business.   The maximum depreciation deduction for 2017 is:

		$3,160
		$11,160
		$8,928
		$9,486

In August of 2017, Joseph acquires and places into services business equipment costing $300,000. The equipment is classified as 5-year recovery property. No other acquisitions are made during the year. Joseph elects to expense the maximum amount under Sec. 179. Joseph’s total deductions for the year are

		$60,000
		$500,000
		$100,000
		$300,000

For the current tax year, VBN, an S Corporation distributes $100,000 to its sole shareholder, Raymond. His basis in the stock was $140,000 before the distribution. VBN had once been a regular C Corporation and had remaining accumulated earnings and profits (E&P) from those years of $70,000. However, VBN has no balance in its accumulated adjustment account. How should the distribution of $100,000 be handled?

$100,000 as a taxable distribution

$70,000 as a taxable dividend, and $30,000 has a non taxable return of capital

$50,000 as a taxable dividend, and $100,000 as a non taxable return of capital

$70,000 as a taxable dividend; and $30,000 as a capital gain

Stahl, an individual who owns 100% of Talon, an S corporation, had a basis of $50,000 at the first of the year. During the year Talon reported the following: Ordinary Loss of $10,000; Municipal interest income of $8,000, Long term capital gain of $4,000; and Long term capital loss of $9,000. What was Stahl's basis in Talon at year end?

		$56,000
		$65,000
		$53,000
		$43,000

Gross Receipts of $70,000; Tax Exempt Interest Income of $4,000; Dividends of $10,000; Supplies Expense of $3,000; and Utilities Expense of $1,500. What amount is the S Corporation's ordinary taxable income?

		$75,500
		$79,500
		$70,000
		$65,500

Bob and Sam each owned 50% of Lostalot, an S Corporation. Bob's basis is $30,000 and Sam's basis is $15,000. The corporation has operating loss for the current year of $50,000.   How much loss can each shareholder deduct in the current year assuming they materially participate in the business:

		Bob: $25,000; Sam: $15,000
		Bob: $0; Sam: $0
		Bob: $25,000; Sam: $25,000
		Bob: $30,000; Sam: $15,000

Terra Corporation, a calendar-year taxpayer, purchases and places into service in 2017 machinery with a 7-year life that cost $650,000. The mid-quarter convention does not apply. Terra’s taxable income for the year before the Sec. 179 deduction is $700,000. What is Terra’s total maximum depreciation deduction related to this property?

		$585,718
		$521,345
		$92,885
		$500,000

Identify which of the following statements is false.

		The PTI (previously taxed income) represents the balance of undistributed net income which were already taxed.
		The AAA balance can be negative, but the shareholder's basis in the S corporation stock cannot be less than zero.
		Tax exempt income increase the AAA and the basis of the S corporation stock.
		An S Corporation may or may not have accumulated Earnings and Profits Elaine owns an unincorporated manufacturing business. In 2017, she purchases and places in service $600,000 of qualifying five year equipment for use in her business. Her taxable income from the business before any section 179 deduction is $100,000. Which of the following statements is true?

Elaine cannot deduct any Section 179 deduction for 2017

Elaine can deduct $100,000 as a Section 179 deduction in 2017 with a $400,000 carryover to next year.

Elaine can deduct $100,000 as a Section 179 deduction in 2017 with a $500,000 carryover to the next year

Elaine can deduct $500,000 as a section 179 deduction in 2017

Charles, an individual, owned 100% of the Alpha, an S corporation. At the first of the year, Charles' basis in Alpha was $25,000. In the current year, Alpha realized ordinary income of $1,000; and a long term capital gain of $3,000. Alpha distributed $25,000 to Charles at the end of the year. What amount of the $25,000 is taxable to Charles?

		$0
		$7,000
		$1,000
		$25,000

Answer 1

Answer 1: Olive receives 15% of the stock.

Answer 2: $ 12000 as per double declining method, $ 6000 as per SLM

Answer 3: Accumulated earninngs are taxed when they are distributed. Hence only 10,000 when distributed would be taxed in hands of Tex

Answer 4: S Corporation can not have nore then 100 partners, thus its status would be terminated when they will have 125 partners

Answer 5: January 1, 1994; because election was made before 15th of the third month of the tax year.

***tutor here is required to answer initital 4 questions in case of multi questions posted at once. Hope you understand and give a like for these correct answers. Thanks***