1. A corporation may alternate between S corporation and C corporation status each year, depending on which results in more tax savings.

a. True

b. False

2. If the IRS reclassifies debt as equity under ? 385, the repayment of the debt by the corporation to the shareholder is treated as a dividend, assuming adequate E & P.

a. True

b. False

3. Dave contributes land (adjusted basis of $30,000; fair market value of $100,000) to Tan, Inc., in exchange for all of its stock. The land is encumbered by a mortgage of $27,000 which Tan assumes. Since the transaction qualifies for nonrecognition treatment under ? 351, Tan?s adjusted basis for the land is $3,000 ($30,000 ? $27,000) and Dave's adjusted basis for the stock is $3,000.

a. True

b. False

4. Amos contributes land with an adjusted basis of $70,000 and a fair market value of $100,000 to White, Inc., an S corporation, in exchange for 50% of the stock of White, Inc. Carol contributes cash of $100,000 for the other 50% of the stock. If White later sells the land for $110,000, $35,000 [$30,000 + 50%($10,000)] is allocated to Amos and $5,000 ($10,000 x 50%) is allocated to Carol.

a. True

b. False

5. To the extent of built-in gain at the time of contribution, partnerships may choose to allocate or not allocate gain on the sale of contributed property to the contributing partner.

a. True

b. False