S Corporations and Depreciation- True or False

1. MACRS is an accelerated depreciation system that is used to stimulate the economy by providing longer lives for depreciation items.

2. Without Section 351, any gain realized on the transfer of property to an S corporation in exchange for stock of the corporation would be recognized.

3. Amounts of the Sec. 179 election in excess of the taxable income limitation can be carried forward.

4. Under the Mid Quarter Convention, one half of the first year's depreciation is allowed in the year in which the property is placed in service, regardless of when the property is put in service.

5. Sam and Sally are married with taxable income of $200,000 which includes $20,000 of capital gains. Sally's share of a 50% owned S corporation's business income is $100,000. Their QBID would be $36,000.

6. The QBID will always be the lessor of 20% of the business income of an S corporation or the taxpayer's taxable income less capital gains and dividends times 20%.

7.An S Corporation election made within the first 3 and 1/2 months of the beginning of the corporation's tax year is effective from the first day of that tax year.

8. The pro rata share of tax exempt interest decreases the basis of a shareholder's stock.

9. John is single with ordinary income of $50,000 from a 100% owned S Corporation. His taxable income is $40,000. His QBID would be $10,000.

10. Separately stated items of an S Corporation can flow to the owners in a lump sum.