Expert Answer :CHAPTER 1UNDERSTANDING AND WORKING WITH THE FED

Solved by verified expert :1383. CHAPTER 12—S CORPORATIONS Question PR #7You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.Beginning stock basis $42,570Stock purchases 15,000Insurance premiums paid (nondeductible) 3,600Tax-exempt interest income 5,230Payroll tax penalty 3,770Increase in AAA 22,400Increase in OAA 5,800 1384. CHAPTER 12—S CORPORATIONS Question PR #8On December 31, 2010, Erica Sumners owns one share of an S corporation’s 10 outstanding shares of stock. The basis of Erica’s share is $300. During 2011, the S corporation has no income or deductions, but incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of 2011.1385. CHAPTER 12—S CORPORATIONS Question PR #9Blue Corporation elects S status effective for tax year 2011. As of January 1, 2011, Blue’s assets were appraised as follows. Adjusted Basis Fair Market ValueCashAccounts receivableInventory (FIFO)Investment in landBuildingGoodwill $ 16,010–0–70,000110,000220,000–0– $ 16,01055,40090,000195,000275,00093,000 In each of the following situations, calculate any built-in gains tax, assuming that the highest corporate tax rate is 35%. C corporation taxable income would have been $100,000.a. During 2011, Blue collects $48,000 of the accounts receivable and sells 80% of the inventory for $99,000.b. In 2012, Blue sells the land held for investment for $203,000.c. In 2013, the building is sold for $270,000. 1386. CHAPTER 12—S CORPORATIONS Question PR #10Pepper, Inc., an S corporation in Norfolk, VA, generates revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by Pepper.1387. CHAPTER 12—S CORPORATIONS Question ES #1What are the characteristics of an S corporation’s straight debt? 1388. CHAPTER 12—S CORPORATIONS Question ES #2Explain how family members are treated for purposes of the number of shareholders requirement concerning S corporation status.