A Section 444 election may be made by an S corporation that wants to use a tax year that would otherwise not be allowed. The Section 444 election can be made if the resulting defer ral period is not more than:

	a.	One month
	b.	Three months.
	c.	Four months
	d.	Six months.

3.75 points

QUESTION 2

Marshall Corp. is a qualified S corporation subsidiary of Peterson Corp. Therefore:

		Marshal l and Peterson will file a consolidated tax return.
		Marshall must file its tax return with the same I RS center where Peterson files its tax return.
		Peterson must continue to own 80% or more of Marshall for the Q Sub election to remain i neffect.
		None of the above.

3.75 points

QUESTION 3

Which of the following statements is correct?

	a.	If a parent corporation loses its S corporation status, the Q Sub election will terminate as ofthe last day of the previous tax year.
	b.	If a parent corporation loses its S corporation status, thereby terminating the Q Sub election,the former Q Sub will be able to retain its S corporation status.
	c.	For taxable years beginning i n 2007. if the qualified subchapter S subsid iary ceases to be aqualified subchapter S subsidiary, the sale is treated as a sale of an undivided interest i n theassets of the qual ified subchapter S subsidiary based on the percentage of the stock sold.
	d.	All of the above

3.75 points

QUESTION 4

A grantor trust is a shareholder of an S corporation. If the grantor dies:

		The trust becomes an i neligible shareholder causing the termination of the S corporationelection .
		The estate of the deceased owner becomes the deemed owner of the S corporation stock
		The beneficiaries of the trust become the deemed owners of the Scorporation stock.
		The trust can remain a shareholder in the S corporation for a term of three years after the death ofthe grantor.

3.75 points

QUESTION 5

Which of the following statements regarding a QSST is correct?

	a.	It is allowed up to 100 income beneficiaries.
	b.	It requires actively pursuing the QSST status.
	c.	It is allowed to accumulate income.
	d.	The revocation of its election to be treated as such is automatically revocable.

3.75 points

QUESTION 6

Who is treated as the owner of the S corporation stock when a qualified Subchapter S trust (QSST) holds Scorporation stock?

		The current income beneficiary
		The future income beneficiary.
		The executor of the trust.
		The grantor.

3.75 points

QUESTION 7

If a qualified Subchapter S trust terminates during the life of the income beneficiary :

	a.	The trust becomes an ineligible S corporation shareholder and the S election is terminated.
	b.	All of the corpus of the trust is distributed to the income beneficiary.
	c.	The future income beneficiary is treated as the owner of the S corpora tion stock.
	d.	None of the above.

3.75 points

QUESTION 8

Which of the following statements is correct regarding electing small business trusts (ESBT)?

	a.	An electing small business trust (ESBT) can have only one beneficiary at a time.
	b.	An ESBT is allowed to accumulate income.
	c.	Any interest in an ESBT must have been purchased.
	d.	All of the above

3.75 points

QUESTION 9

A trust that elected to be a small business trust (ESBT):

	a.	Is taxed as if it were a complex trust.
	b.	Computes taxable income from the S corporation separately from other sources of income.
	c.	Files multiple tax returns for each source of income.
	d.	All of the above.

3.75 points

QUESTION 10

Which of the following entities cannot be a shareholder in an S corporation?

	a.	A tax exempt organization
	b.	An estate
	c.	A foreign trust
	d.	A single member LLC

3.75 points

QUESTION 11

Which of the following items must be separately stated on an S corporation tax return?

	a.	Interest income
	b.	Section 179 expense
	c.	Tax exempt income.
	d.	All of the above

3.75 points

QUESTION 12

Which of the following statements is correct?

	a.	All S corporations are subject to the tax on excess net passive income.
	b.	Al l S corporations with accumulated earnings and profits from prior years as a C corporationare subject to the tax on excess net passive income
	c.	All S corporations that were C corporations before electing S corp ration status aresubject to the tax on excess net passive income.
	d.	None of the above

3.75 points

QUESTION 13

A corporation that has been an S corporation since its inception can still be subject to the followingtax.

	a.	Built in gains tax
	b.	Tax on excess net passive income
	c.	Tax on LIFO inventory recapture
	d.	None of the above.

3.75 points

QUESTION 14

The built-in gains tax applies to:

	a.	Disposition of assets in liquidation.
	b.	Disposition of assets not in liquidation .
	c.	Both of the above.
	d.	None of the above

3.75 points

QUESTION 15

Which of the following statements is correct regarding built-in gains taxes?

	a.	I t is the corporation 's responsibility to prove the fair market value of assets on the date an Selection takes effect.
	b.	Built in gains tax can be reduced by carry forwards from prior C corporation years.
	c.	Built in gains tax will apply to assets disposed within 10 years of the corporations first dayas an S corporation.
	d.	All of the above

3.75 points

QUESTION 16

The Richardson Corporation has been an S corporation since its inception. 50% of Richardson 'sgross receipts are from investment income sources. Which of the following statements is correct?

	a.	Richardson is subject to the tax on excess net passive income.
	b.	Richardson will pay tax on this income at the highest rate applicable.
	c.	Both of the above.
	d.	None of the above

3.75 points

QUESTION 17

Shannon owns 100 shares (100%) of the Blue Moon S corporation at the beginning of the year. OnMarch 16 (75 days into the year), Shannon sells 30% of her shares to Stepha nie. Blue Moonproduces $ I 00,000 of ordinary income du ring the year. Assuming there is no election made toterminate the tax year, what is the proper income allocation for Shannon and Stephanie?

	a.	Shannon - $52.176; Stephanie - $47,824.
	b.	Shannon - $70,000; Stephanie - $30.000.
	c.	Shannon - $76, 164; Stephanie - $23,836
	d.	Shannon - $73,000;Stephanie - $27,000.

3.75 points

QUESTION 18

Shannon owns 100 shares ( 100%) of the Blue Moon S corporation at the beginning of the year. OnMarch 16 (75 days into the year), Shannon sells 30% of her shares to Stephanie. Blue Moonproduces $100,000 of ordinary income during the year ($10,000 of income through March 16, and$90,000 of income after March 16). Assuming there is an election made to terminate the tax yearon March 16, what is the proper income allocation for Shannon and Stephanie?

	a.	Shannon - $52, 176; Stephanie - $47,824.
	b.	Shannon - $70,000; Stephanie - $30,000.
	c.	Shannon - $76,164 - Stephanie - $23,836
	d.	Shannon - $73,000; Stephanie - $27,000

3.75 points

QUESTION 19

A shareholder that provides services to an S corporation in exchange for stock i n the S corporation , willhave a basis in the stock equal to:

	a.	His basis i n the services rendered .
	b.	The fair market value of the services rendered.
	c.	His basis in the services rendered pls any gain recognized on the services rendered.
	d.	None of the above

3.75 points

QUESTION 20

The initial basis of S corporation stock received as a gift (and no gift tax i s paid on the transfer) isequal to

		The donor's basis in the stock.
		The fair market value of the stock on the date of the transfer.
		The lower of the donor's basis, or the fair market value at the time of the gift.
		The proportionate share of the value of the corporation 's assets (net of liabilities) that isallocated to the shares.