S-Corps Flashcards
The eligibility requirements of an S-Corp restrict shareholders to who?
Which one of the following statemetns concerning the eligibility requirements for S-Corps is NOT correct?
a) A partnership is not permitted to be a shareholder of an S-Corp
b) An S-Corp is permitted to own 75% of the stock of another S-Corp
c) An S-Corp is permitted to be a partner in a partnership
d) An S-Corp is permitted to own 100% of the stock of a C-Corporation
B = Correct for MCQ purposes (S-Corps are not allowed to own stock in another S-Corp)
Shareholders are restricted to:
1) Individuals (other than nonresident aliens)
2) Estates
3) Certain Trusts
Partnerships and C-Corps are NOT PERMITTED to own stock in an S-Corp
An S-Corp is allowed to be a partner in a Partnership and CAN OWN AND % OF C-CORP STOCK AND AND 100% OF ANOTHER S-CORP’S STOCK
A corporation that has been an S corporation from its inception may:
1) Have both passive and nonpassive income
2) Be owned by a bankruptcy estate
1) Yes
2) Yes
To qualify as an S Corp, a corporation must have 100 or fewer SH who are individuals (other than nonresident aliens), certain trusts, or estates (including bankruptcy estates).
If a corp has been an S Corp since its inception, there is not limitation on amount or type of income that it generates, and it can have both passive and nonpassive income
Which one of the following statements concerning the eligibility requirements for S-Corps is not correct?
1) An S-Corp is permitted to own 90% of the stock of a C-Corp
2) An S-Corp is permitted to own 100% of the stock of another S-Corp
3) An S-Corp is permitted to be a partner in a partnership
4) A partnership is permitted to be a shareholder of an S-Corp
4) is the incorrect (correct for purposes of this MCQ) option since Partnerships and C-Corps are NOT Permitted to own stock in an S-Corp
Grant Corp, an S-Corporation, had income of $36k for the year ended 12/31/Y1. Included in the above is $24k of LT Cap Gain. Cash distributions to the sole shareholder, totaled $12k during Y1. What amount should the sole shareholder report on his Y1 individual income tax return as LT Gain passed from Grant Corp?
$24k as the LT Cap gain is passed through to the shareholders
With regard to S-Corp and their stockholders, the “at-risk” rules applicable to losses:
a) Depend on the type of income reported by the S-Corp
b) Are subject to the elections made by the S-Corp stockholders
c) Take into consideration the S-Corp’s ratio of debt to equity
d) Apply at the shareholder level rather than at the corporate level
d = correct. The at-risk rules apply to S-Corp shareholders rather than at the corporate level, with the result that the deduction os S-Corp losses is limited to the amount of a shareholder’s at-risk investment
