QUESTION 1 In terms of Stock Basis Considerations, a general rule is that a shar

Question

QUESTION 1

In terms of Stock Basis Considerations, a general rule is that a shareholder's outside basis is her/her stock basis.

True

False

5 points   

QUESTION 2

Which of the following statements is true. Click all that apply.

An S corporation has E&P only if it was classified as a C corporation in the past or acquired a C corporation.

Tax effect of distributions are the fair market value (FMV) of distributions to shareholders are tax-free to the extent the distribution exceeds basis. the extent of the lesser of: (1) AAA balance and (2) stock basis. Now, let’s talk about distributions without accumulated earnings & profits and distributions with accumulated earnings & profits..

There is a two-tier system in effect for S corporations without accumulated earnings and profits.

Records and information pertaining to each shareholder’s accumulated adjustment account (AAA) are needed by S corporations only for purposes of helping shareholders determine taxability of distributions when the S corporation has earnings and profits (E&P).

5 points   

QUESTION 3

Computation of At-Risk Basis are calculated by taking:

Loans for which the shareholder has personal liability or has pledged as security for repayment property not used in the activity of the corporation. (Please note, this does not include other debts of the corporation to third parties, even if the repayment is guaranteed by the shareholder.)

Allocated portion of income

Less: Allocated portion of losses

Less: Distributions at fair market value (not at partnership basis)

5 points   

QUESTION 4

At-risk basis is equal to the sum of:

Cash and basis of property contributed to the S corporation (to the extent unencumbered) and outstanding shareholder loans to the S corporation.

True

False

5 points   

QUESTION 5

S corporations with accumulated earnings and profits have a four-tier system for determining status of distributions:

tax free to the extent of AAA

dividend income to the extent of any AE&P

tax free to the extent of OAA

gain

An S corporation has E&P only if it was classified as a C corporation in the past or acquired a C corporation.

Tax effect of distributions are the fair market value (FMV) of distributions to shareholders are tax-free to the extent the distribution exceeds basis. the extent of the lesser of: (1) AAA balance and (2) stock basis. Now, let’s talk about distributions without accumulated earnings & profits and distributions with accumulated earnings & profits..

There is a two-tier system in effect for S corporations without accumulated earnings and profits.

Records and information pertaining to each shareholder’s accumulated adjustment account (AAA) are needed by S corporations only for purposes of helping shareholders determine taxability of distributions when the S corporation has earnings and profits (E&P).

Explanation / Answer

Question 1:Statement is True.

Question 2:Satement A is correct

Question3 : True

Question4 : True

Question5 : False

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.