Exam 2 -1

Question 1

What is AAA account of S Corp

Answer 1

Earning and profits of S corp. It is like retained earning of S corp.

Question 2

How did the distribution of S corp from accumulated earnings and profits from the period when it was C Corp

Answer 2

Ordinary dividends

Question 3

How do you treat the distribution from AAA account S Corp

Answer 3

Tax Free

Question 4

What is order of distribution of S corp that was once C Corp

Answer 4

AAA earnings and profits first, then C Corp earnings and profits.

Question 5

C Corp elected to be S Corp when it has 20,000 earnings and profits in 2023. As an S Corp, it earned 19,000 and distributed 50,000. At the start of the year, there were 7,000

Answer 5

First 19,000 tax-free
Secondly, 20,000 ordinary income
Thirdly, 7,000 non-taxable return of capital
Lastly, 4,000 capital gain

Question 6

Which entity use accrual method regardless of gross income

Answer 6

Tax shelter

Question 7

How do you elect a fiscal year

Answer 7

By filing form 1128