R5R6

Question 1

How much passive investment income can an S corporation realize without termination their S election?

Answer 1

up to 25% of gross receipts.. if over 25% for 3 consecutive years then the election is terminated

Question 2

Is an LLC subject to double taxation?

Answer 2

No

Question 3

What is the gross income requirement in order for a fiduciary to file a for 1041?

Answer 3

$600

Question 4

What impacts the AAA account?

Answer 4

The Accumulated adjustments account is increased by separately stated and non sep stated income and income/gains

ex. Interest and dividends

Question 5

Which are included in calculating ordinary income?

COGS
Interest expense
CC
Admin expenses
LTCG

Answer 5

COGS, Int expense and admin expense

Question 6

What increases/decreases the basis of stock in an S corporation?

Answer 6

Increases: Income items(including tax free income), additional shareholder investments

Decreases: distributions to shareholders, loss or expense items

Question 7

In a nonliquidating distribution, what is the basis taken by partner for asset?

Answer 7

Partner takes the partnership basis for assets distributed . Ex. if basis is 50. distributions are 25 cash and 10 equip …. the basis in equip is 10

Question 8

In a partnership, how are losses between a controlling partner and controlled partnership from exchange treated?

Answer 8

they are not allowed

Question 9

What is the calculation for increase in earnings of CFC property?

Answer 9

Quarterly CFC income for the year/4

Question 10

Define a tax return preparer

Answer 10

any person who prepares for compensation, or who employs one or more persons to prepare for compensation

A signing tax return preparer is a “tax return preparer” if the individual has the primary responsibility for the overall substantive accuracy of the preparation of the return. A nonsigning tax return preparer is a “tax return preparer” if the individual prepares all or a substantial portion of the return or offers advice to a taxpayer when that advice leads to a position or entry that constitutes a substantial portion of the return.

Question 11

How do you calc the gain/loss distributions made to partners in a partnership?

Answer 11

not possible. no G/l recognized

Question 12

What value of property is given in a gift?

Answer 12

FMV of prop

Question 13

What type of gift is not eligible for the annual gift exclusion?

Answer 13

remainder interests and future interests

Question 14

How is partnership basis calculated?

Answer 14

Cash contributed by partner 
\+NBV of property contributed 
- Liabilities contributed by partner and assumed by others
\+FMV of services of partner for interest
\+Liab contributed to other partners
\+recourse liability assumed

Question 15

What is an advantage of selecting a S corporation over a C corporation?

Answer 15

Capital losses and all other items of income/loss flow through to the tax returns of the shareholders

Question 16

What type of business structures can make a distribution of appreciated property to its owners and would not be taxable to the business entity or owners?

Answer 16

General Partnership or LLP

Question 17

what type of entity would the owners basis increase with the share of profits and decrease by share of losses but IS NOT impacted by entity’s bank loan?

Answer 17

S corporation

Question 18

If S corp has no E&P, how is the amount distributed to a shareholder classified as?

Answer 18

Decreases the shareholders basis for the stock

Question 19

In a nonliquidating distribution, when is income taxable?

Answer 19

When the income is greater than the partners basis in the partnership interest….. otherwise a prop distribution is never taxable

Question 20

Can an S corporation have both common and preferred stock?

Answer 20

no