1. Which of the following does not affect the basis of S corporation stock? (Points : 5)

Tax-exempt income Nondeductible expenses Charitable contributions Capital gains All affect stock basis

Question 2.2. Which of the following is not a requirement to make an S election? (Points : 5)

Maximum 100 shareholders One class of stock Shareholders must be citizens It must be a domestic corporation

Question 3.3. The S corporation income tax return includes all of the following except (Points : 5)

a Schedule K. an M-1 Schedule. a retained earnings reconciliation. a reconciliation of the AAA account.

Question 4.4. What is the effect on the AAA if an S corporation distributes a piece of property valued at $10,000 with a $5,000 basis to 50 percent shareholder and $10,000 cash to the other 50 percent shareholder in a nonliquidating distribution? (Points : 5)

$10,000 net increase $5,000 net increase $15,000 net decrease $20,000 net decrease

Question 5.5. An S election terminates (Points : 5)

when a shareholder dies. when there is a nonresident alien shareholder when the S corporation invests in a C corporation when an S corporation has excess passive income

Question 6.6. Which of the following statements does not apply to a qualifying S corporation? (Points : 5)

It may have 55 shareholders It may have a resident alien shareholder It may only have one class of stock outstanding It is subject to the corporate income tax Stock basis may not go below zero.

Question 7.7. If a shareholder does not have sufficient stock basis to deduct his or her share of an S corporation's losses and deductible items, what are the tax consequences? (Points : 5)

The excess losses and deductions may be carried back 3 years and then forward up to 5 years to offset other income items of identical character. The excess losses and deductions are suspended until the corporation's or shareholder's future activities generate sufficient new basis against which to deduct the losses The excess losses and deductions may not be deducted at any time and can never provide tax benefit. None of the above.