TAX II in the State of New Jersey:
Please explain the true and false answer and state if it is True or False, as well as provide a solution and answer for each computation problem.
Question 1. Passive income at the corporate level flows through to the shareholders
True or False
Question 2. An S corporation must recognize gains and losses on a distribution of property to shareholders.
True or False
Question 3. Which of the following is a required characteristic of a corporation qualifying as a small business corporation?
A. Has only one class of stock
B. Is a domestic corporation
C. Has no nonresident alien shareholders
D. Is limited to 100 shareholders
E. All of the above statements are correct
Question 4. An S corporation may take the dividends received deduction
True or False
Question 5
1. Lucy has been the sole shareholder of a calendar year S corporation since 1980. At the end of 2011, Lucy's stock basis is $23,500, and she receives a distribution of $25,000. Corporate level accounts are computed as follows.
AAA 7,000
PTI 11,000
Accumulated E&P 600
2. How much capital gain, if any, will Lucy have?
A. $600
B. $7,000
C. $6,400
D. $ 900
E. None of the Above
Question 6. During 2011, Simon Kidman, the sole shareholder of a calendar year S corporation, received a distribution of $75,000. On December 31, 2010, his stock basis was $24,000. The corporation earned $50,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?
A. Kidman's stock basis will be $2,000
B. Kidman's return of capital is $50,000
C. Kidman recognizes a $1,000 LTCG
D. Kidman's ordinary income is $64,000
E. None of the above
Question 7. Family members can elect to be treated as one shareholder for S corporation purposes.
True or False
Question 8. Which of the following events will cause the termination of an S election?
A. The corporation no longer qualifies as a small business corporation
B. A new shareholder owning more than one-half of the stock affirmatively refuses to consent tothe election
C. The corporation does not meet the passive investment income limitation
D. Shareholders owning 60% of shares (voting and nonvoting) voluntarily revoke the election
E. All of the above
Question 9. All deductions and income items retain any special tax characteristics when they are reported on S corporation shareholders' returns.
True or False
Question 10. Sayid is the sole shareholder of an S corporation in Hattiesburg, Mississippi. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $40,000 (basis of $20,000). There is no built-in gain. Sayid's taxable gain is:
A. $20,000
B. $0
C. $30,000
D. $40,000
E. None of the Above
True/False - Explain all False answers. You may also provide a response to True statements if you believe that the question is ambiguous.
1. Proposed regulations carry more weight than temporary regulations.
2. Procedural regulations are housekeeping-type instructions.
3. The granting of a writ of certiorari indicates that at least three members of the Supreme Court believe that an issue is of sufficient importance to be heard by the full court.
4. New Jersey is in the jurisdiction of the Eighth Circuit Court of Appeals.
5. The IRS is required to make a letter ruling public.
6. Subchapter S refers to the *Partners and Partnership" section of the Intemal Revenue Code.
7. A court generally will hotd a legislative regulation to be invalid if warranted.
8. The IRS responds to a taxpayer request conceming the tax treatment of a completed transaction in a letter ruling.
9. The head of IRS operations is the Chief.
10. Recently, the overall Federal income tax audit rate for individual retums has been about 20%.
11. When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court.
12. Neither party can appeal a decision of the Tax Court Small Cases Division.
13. A $500 penalty is assessed if the tax preparer intentionally disregards IRS rules in completing the retum.
14. The Statements on Standards for Tax Services apply to attorneys, as well as to CPAs.
15. When a practitioner discovers an error in a client's prior retum, the Statements on Standards for Tax Services require that he or she immediately notify the client.
Provide a detailed Short Answer:
16. List the three sources of tax law. Provide a brief statement about each.
17. If a taxpayer has a disagreement with the IRS and has exhausted all administrative efforts, which courts of original jurisdiction will hear his case? (list all)
18. In the question above, explain the differences between the courts with respect to: payment of deficiency before trial, jury trial and types of disputes.
19. Name two on-line tax research sites/software (other than CCH) and provide the web info to access each. Include a copy of the home page of each.