Question

On February 10, 2018, Ace Corporation, a new calendar year corporation, elected S corporation status and all shareholders consented to the election. There was no change in its shareholders during the current year. Ace met all eligibility requirements for an S corporation during the preelection portion of the year. What is the earliest date on which Ace can be recognized as an S corporation?

		February 10, 2018
		January 1, 2019
		February 10, 2019
		January 1, 2018

In March of 2017 Frederick acquired an passenger automobile for $45,000 and used the automobile 85% for business.   The maximum depreciation deduction for 2017 is:

		$3,160
		$11,160
		$8,928
		$9,486

In August of 2017, Joseph acquires and places into services business equipment costing $300,000. The equipment is classified as 5-year recovery property. No other acquisitions are made during the year. Joseph elects to expense the maximum amount under Sec. 179. Joseph’s total deductions for the year are:

		$60,000
		$500,000
		$100,000
		$300,000

For the current tax year, VBN, an S Corporation distributes $100,000 to its sole shareholder, Raymond. His basis in the stock was $140,000 before the distribution. VBN had once been a regular C Corporation and had remaining accumulated earnings and profits (E&P) from those years of $70,000. However, VBN has no balance in its accumulated adjustment account. How should the distribution of $100,000 be handled?

$100,000 as a taxable distribution

$70,000 as a taxable dividend, and $30,000 has a non taxable return of capital

$50,000 as a taxable dividend, and $100,000 as a non taxable return of capital

$70,000 as a taxable dividend; and $30,000 as a capital gain

Stahl, an individual who owns 100% of Talon, an S corporation, had a basis of $50,000 at the first of the year. During the year Talon reported the following: Ordinary Loss of $10,000; Municipal interest income of $8,000, Long term capital gain of $4,000; and Long term capital loss of $9,000. What was Stahl's basis in Talon at year end?

		$56,000
		$65,000
		$53,000
		$43,000

Answer 1

1(d) jan 1, 2018The requirement is to determine the earliest date on which Ace Corp. (a calendar-year corporation) can be recognized as an S corporation. Generally, an S election will be effective as of the first day of a taxable year if the election is made on or before the 15th day of the third month of the taxable year. Since there was no change in shareholders during the year, all of Ace's shareholders consented to the election, and Ace met all eligibility requirements during the preelection portion of the year, its election filed on February 10, 2018

, is effective as of January 1, 2018. Note that if either a shareholder who held stock during the taxable year and before the date of election did not consent to the election, or the corporation did not meet the eligibility requirements before the date of election, then an otherwise valid election would be treated as made for the following taxable year.

2.(a) $3,160

3.(a) $60,000