1) Identify which of the following statements is true.
A. A partnership can be an S corporation shareholder.
B. A nonresident alien can be an S corporation shareholder.
C. An S corporation can have more than 100 shareholders since families are treated as a single shareholder.
D. All are false.
2) Identify which of the following statements is true.
A. Shareholders who acquire stock in an S corporation after the election date and prior to the election's effective date must consent to the election.
B. S corporation consent by shareholders is binding on the current tax year and all future tax years.
C. Only shareholders who own stock on the date an S election takes effect must consent to the election.
D. All are false.
3) The definition of a partnership does not include
A. a syndicate
B. a group
C. a pool
D. All are included
4) Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31, the partnership has book income of $80,000, which includes the following deductions: (1) guaranteed payments (salaries) to partners: Matt, $35,000; and Joel, $25,000; and (2) charitable contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any tax-exempt income. Based on the above information, what amount should be reported as ordinary income on the partnership return?
A. $60,000
B. $140,000
C. $86,000
D. $80,000
5) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2008. Tex and Shirley each own 50% of the stock. Cactus does not make any distributions during 2008, but had $200,000 of ordinary income. In 2009, ordinary income was $100,000 and distributions were $100,000. What is Tex's ordinary income for 2009?
A. $0
B. $200,000
C. $100,000
D. $50,000
6) Identify which of the following statements is true.
A. An election for an S corporation to use the Sec. 179 expensing election is made by the corporation and not by its shareholders.
B. The S corporation's separately stated items are in general the same ones that apply in partnership taxation.
C. An S corporation cannot claim a dividends-received deduction.
D. All are true.
7) On January 2 of the current year, Calloway and Taylor contribute cash equally to form the CT Partnership. Calloway and Taylor share profits and losses in a ratio of 75% and 25%, respectively. The partnership's ordinary income for the year was $40,000. Calloway received a distribution of $5,000 during the year. What is Calloway's share of taxable income for the year?
A. $5,000
B. $30,000
C. $20,000
D. $10,000
8) Identify which of the following statements is true.
A. Distribution of partnership income in the form of cash to partners is generally tax-free to the partners and the partnership.
B. When partners receive cash distributions from the partnership, they pay taxes on those distributions.
C. If money distributions exceed the partner's basis in the partnership interest, a partner would have to recognize gain on a distribution from the partnership. Such gain is usually an ordinary gain.
D. All are true.
9) On January 1, Helmut pays $2,000 for a 10% capital, profits and loss interest in a partnership, which has recourse liabilities of $20,000. The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses. In the same year, the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000. Helmut and the partnership use a calendar tax year-end. Helmut's basis at year-end is
A. $1,500
B. $3,900
C. $3,500
D. $2,000