Review

Question 1

What is a derivative suit

Answer 1

A SH sued on behalf of a corporation

Question 2

The rule limiting the deductibility of passive activity losses and credits applies to what type of corporation?

Answer 2

Personal Service corporation

Question 3

When repossess collateral is sold, who is the first obligation that are paid?

Answer 3

the expenses that the 3rd party has incurred relating to the repossession and selling of the collateral.

Question 4

what is needed to create an enforceable security interest?

Answer 4

it must exist
the secured party must give value
the debtor must have rights in the collateral

Question 5

how does one perfect an interest in an enforceable secutity interest?

Answer 5

by filing a financing statement

Question 6

securities available under a private placement made pursuant to regulation D of the securities act of 1933 cannot…

Answer 6

be the subject of an immediate reoffering to the public

Question 7

what must be provided to satisfy the Statute of Frauds under the UCC for a contract for the sale of goods?

Answer 7

the writing must provide sufficient evidence of a contract for the sale of goods, the signature of the party to be charged, and the quantity term.

Question 8

Under Regulation D of the Securities Act of 1933, what is the maximum time period during which an exempt offering may be made?

Answer 8

12 months

Question 9

How many types of stock may an S corp have?

Answer 9

1 (can be voting and nonvoting however)

Question 10

How many SHs may a S corp have?

Answer 10

100 or less

Question 11

how are couples that are both S corp SHs treated by the S corp?

Answer 11

as one.

Question 12

if an S corp is revoked or terminated, how many years must a corp wait before reelecting S corp status?

Answer 12

5 years

Question 13

related to passive investment income, how will an S corp terminate?

Answer 13

if it has passive inv income exceeding 25% of gross receipts in each of the prior 3 consecutive years

Question 14

what type of income does an S corp have?

Answer 14

passive and nonpassive income. However, if an S corporation has excessive net passive income, a tax at the highest corporate rate is imposed on the excessive passive income. Excessive passive income is the amount that passive investment income exceeds 25 percent of the corporation’s gross receipts.

Question 15

who may be SH of an S corp?

Answer 15

individuals, estates, and certain trusts

Question 16

how many shares must be issued/outstanding for an S corp to be involuntarily revoked

Answer 16

25,001 shares

Question 17

are S corps allowed a dividend received deduction?

Answer 17

no

Question 18

what amount of health insurance premiums is included in SHs gross income?

Answer 18

the entire premium payment must be included in income since SH owns 2% or more of the S corps stock. if SH owned < 2% of the stock, the entire premium pmt could be excluded from income.

Question 19

can corps be a SH in S corps?

Answer 19

no

Question 20

what happens to income of an S corp

Answer 20

Income for an S corporation includes taxable and tax-exempt interest. All income of an S corporation is passed through to the shareholder and results in an increase in the shareholder’s basis in the stock of the corporation. The shareholder is responsible for any taxes that may or may not apply to the S corporation’s income.

Question 21

A corporation that is currently an S corporation needs to account for distributions to shareholders using

Answer 21

an accumulated adjustments account if the corporation has earnings and profits from a period in which it was subject to the corporate tax as a C corporation.

Question 22

will the SH have a gain if the cash amount distributed by the S corp exceeds the SH’s adj basis in the stock?

Answer 22

yes

Question 23

If an S corporation has no accumulated earnings and profits, the amount distributed to a shareholder

Answer 23

Decreases the shareholder’s basis for the stock. A distribution from an S corporation that has no accumulated earnings and profits reduces the basis of a shareholder’s stock. If the payment exceeds the shareholder’s basis in the stock, it is viewed as a payment in exchange for stock.

Question 24

built in gain property

Answer 24

property that has appreciated in value at the time of its contribution to the partnership (the value of gain property is greater than its adjusted basis, whereas the value of loss property is less than its adj basis.