1. Supreme Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2019. Bryan and Fatima each own 50% of the stock. Supreme does not make any distributions during 2019, but had $200,000 of ordinary income. In 2020, ordinary income was $100,000 and distributions were $100,000. What is Bryan's ordinary income for 2019? A) $0 B) $50,000 C) $100,000 D) $200,000

2. Identify which of the following statements is true.

A) Green Corporation, an S corporation, has gross receipts of $240,000; taxable income of $120,000; passive investment income of $100,000; and expenses directly attributable to the passive investment income of $20,000. The corporation's excess net passive income is $32,000.

B) The built-in gains tax applicable to S corporations can be avoided if the property is held for ten years.

C) An S corporation generally will not owe the built-in gains tax if the corporation has never been a C corporation.

D) All of the above are true.

3. Identify which of the following statements is false.

A) Jade is a shareholder in an S corporation. Her stock basis is $10,000 and her basis in a loan she made to the corporation is $3,000. Jade's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at-risk and passive activity limitations, Jade can deduct the loss in full.

B) A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness.

C) A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss-passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder.

D) Debt basis is restored before stock basis.

4. Green Corporation, an S corporation, had accumulated earnings and profits of $100,000 at the beginning of 2018. Bryan and Fatima each own 50% of the stock and have a basis in their stock of $50,000 on January 1, 2018. Green does not make any distributions during 2018, but had $200,000 of ordinary income. In 2019, ordinary income was $100,000 and distributions were $100,000. What is Bryan's basis at January 1, 2020?

A) $100,000

B) $150,000

C) $200,000

D) $250,000

5. Jones Corporation was incorporated on January 1, 2010. The corporation made its S election on March 1, 2013. The corporation retains an E&P balance from its C corporation days. During the current year, it made a cash distribution to its sole shareholder Steven Jones. What is the proper sequence in reducing the corporate earnings accounts for the distribution?

A) AAA; E&P

B) AAA; OAA; E&P

C) E&P; AAA

D) AAA; PTI; E&P

6. Identify which of the following statements is true.

A) Fringe benefits limited by the more-than-2%-shareholder rule include stock options, group term life insurance premiums, and medical insurance premiums.

B) A shareholder owning 2% or more of an S corporation's stock, who is also an employee of the corporation, must include all statutory fringe benefits in gross income on his/her individual return.

C) Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock.

D) All of the above are false.

7. Which of the following items is not separately stated for an S corporation?

A) short-term capital gain

B) dividend income

C) Section 1245 income

D) charitable contribution

Please explain how you get the answers