Prentice Hall S Federal Taxation Test B

Prentice Hall's Federal Taxation 2013 Corporations, 26e (Pope)

Chapter C11 S Corporations

1) The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation.
Answer: TRUE
Page Ref.: C:11-2
Objective: 1

2) Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.
Answer: TRUE
Page Ref.: C:11-4
Objective: 2

3) Corporations and partnerships can be S corporation shareholders.
Answer: FALSE
Page Ref.: C:11-4,
Objective: 2

4) A testamentary trust can be an S shareholder for two years, beginning on the date the stock transfers to the trust.
Answer: TRUE
Page Ref.: C:11-5
Objective: 2

5) The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.
Answer: TRUE
Page Ref.: C:11-8
Objective: 3

6) A corporation must make an S election for the current year after March 15 in the case of a calendar-year corporation.
Answer: FALSE
Page Ref.: C:11-8
Objective: 3

7) All shareholders must consent to the revocation of S status.
Answer: FALSE
Page Ref.: C:11-9
Objective: 3

8) Even if the termination of an S election is considered to be inadvertent, the election to terminate is irrevocable.
Answer: FALSE
Page Ref.: C:11-11
Objective: 3
9) Tax-exempt interest earned by an S corporation is not reported to its shareholders because it is excluded from the shareholders' gross income.
Answer: FALSE
Page Ref.: C:11-15
Objective: 4

10) S shareholders are allocated shares of income, gain, loss, deduction, and credit based on their number of shares of stock and period of time for which the stock is held.
Answer: TRUE
Page Ref.: C:11-19
Objective: 5

11) S shareholders cannot increase the basis of their stock by a ratable share of the general S corporation liabilities.
Answer: TRUE
Page Ref.: C:11-21
Objective: 5

12) The