34. The following will result in a corporations loss of S status or failure to qualify except a. issuing two types of stock, voting common stock and non-voting common stock. b. having a partnership as a shareholder. c. being incorporated in Canada. d. having 101 shareholders, all unrelated to each other. 35. An S corporation will not be subject to federal income tax unless a. 75% of its shareholders so elect. b. it has foreign source income. c. it is the successor to a C corporation. d. it elects to become a limited liability company(LLC). 36. Passive investment income may cause an S corporation to lose S status a. if it exceeds 30% of the corporations adjusted gross income for 3 consecutive tax years. b. unless it is not a successor to a C corporation. c. if it is a successor to a C corporation having assets in excess of $10 million fair market value. d. if the passive investment income was generated by real estate investments. 37. S corporation owns real estate having a basis of $50,000. When the real estate has appreciated in value to $100,000 S corporation distributes it to a shareholder. The distribution a. has no immediate tax effect and the shareholder takes a basis of $50,000 in the real estate. b. results in the corporation realizing and recognizing gain of $50,000. c. causes any gain recognized by the corporation to be taxed to the corporation. d. is a tax deferred transaction that may cause the corporation to lose its S status if the shareholder/distributee is a more than 50% shareholder. 38. Distributions to a shareholder from an S corporations Accumulated Adjustments Account(AAA) are a. tax free to the shareholder. b. tax-free to the extent of pre-1982 gross income. c. income taxable to the shareholder if the S corporation is the successor to a C corporation. d. forbidden until the S corporations Other Adjustments Account (OAA) is exhausted. 39. Bill owns 50% of the outstanding shares of stock of S corporation. a. Bill may revoke the corporations S status. b. Bill may not revoke the S status of the corporation. c. Bill may sell all of his shares to a third party thus causing the deemed dissolution of the S corporation and the deemed creation of a successor C corporation. d. Bill may sell all or any of his shares to Igor, a citizen of Transylvania residing in Stateboro,GA, thus causing the corporation to lose its S status. 40. S corporation borrows $5,000 from Bank @6% interest for one year. a. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock. b. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders. c. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000. d. Partnership and S corporation tax rules allowing partners/shareholders to increase the basis of partners/shareholders by the amount of partnership/corporation debt are identical