McGraw Hills Essentials of Federal Taxation 2025 By Spilker, Ayers, Robinson, Outslay, Worsham etc (Test Bank)
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Course
Taxation
Institution
Taxation
This is Original Test Bank for 2025 edition, all other test bank in the market are wrong/old (2023, 2024) questions.
Test Bank Includes all chapters 1-17, but arranged reverse 17 to 1.
McGraw Hills Essentials of Federal Taxation 2025 By Spilker, Ayers, Robinson, Outslay, Worsham etc (Test Ba...
Student name:__________
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Corporations taxed as S corporations offer the same legal protection to owners as
corporations taxed as C corporations.
⊚ true
⊚ false
2) The S corporation rules are less complex for S corporations that have earnings and profits
from prior C corporation years than for S corporations that do not have earnings and profits
from prior C corporation years.
⊚ true
⊚ false
3) The same exact requirements for forming and contributing property govern S corporations
and partnerships.
⊚ true
⊚ false
4) S corporations may have no more than 50 shareholders, but members of the same family only
count as one shareholder.
⊚ true
⊚ false
5) Differences in voting powers are permissible across shares of S corporation stock as long as
the shares have identical distribution and liquidation rights.
⊚ true
⊚ false
6) Publicly traded corporations cannot be treated as S corporations.
⊚ true
⊚ false
7) To make an S election effective as of the beginning of the current year, an S corporation must
file IRS Form 2553 within three and a half months after the beginning of the year.
⊚ true
⊚ false
Version 1 1
,Chapter 17
8) Bobby T (95 percent owner) would like to elect S corporation status for DJ, Incorporated, but
Dallas (5 percent owner) does not want to elect S corporation status. Bobby T cannot elect S
status for DJ, Incorporated, without Dallas's consent.
⊚ true
⊚ false
9) An S corporation election may be voluntarily or involuntarily terminated.
⊚ true
⊚ false
10) An S corporation can make a voluntary revocation of an S election if shareholders holding
more than 25 percent of the S corporation stock (including nonvoting shares) agree.
⊚ true
⊚ false
11) Bobby T (75 percent owner) would like to terminate the S corporation status of DJ,
Incorporated, but Dallas (5 percent owner) does not want to terminate S corporation status.
Bobby T can terminate the S corporation status for DJ, Incorporated, without Dallas's
consent.
⊚ true
⊚ false
12) An S election is terminated if the S corporation has passive investment income in excess of
20 percent of gross receipts for three consecutive years.
⊚ true
⊚ false
13) If an S corporation never operated as a C corporation, it may earn passive investment income
without fear of an involuntary S election termination.
⊚ true
⊚ false
14) If an S corporation shareholder sells their stock to a nonresident alien, it will automatically
terminate the S election.
⊚ true
⊚ false
Version 1 2
,Chapter 17
15) The specific identification method is a method an S corporation may use to allocate its
income across short tax years that result from an involuntary S election termination.
⊚ true
⊚ false
16) The specific identification method and monthly allocation method are methods an S
corporation may use to allocate its income across short tax years that result from an
involuntary S election termination.
⊚ true
⊚ false
17) After terminating or voluntarily revoking S corporation status, a corporation may elect it
again, but it generally must wait until the beginning of the third tax year after the tax year in
which it terminated the election.
⊚ true
⊚ false
18) Like partnerships, S corporations generally determine their accounting periods and make
accounting method elections at the entity level.
⊚ true
⊚ false
19) S corporations face the same restrictions as partnerships and C corporations on using the cash
method of accounting.
⊚ true
⊚ false
20) An S corporation can use a noncalendar year-end if it can establish a business purpose for an
alternative year-end.
⊚ true
⊚ false
21) SoTired, Incorporated, a C corporation with a June 30 year-end, elects S corporation status
this year. Assuming no special elections, SoTired, Incorporated, will continue to use a June
30 year-end as an S corporation.
⊚ true
⊚ false
Version 1 3
, Chapter 17
22) S corporations have considerable flexibility in making special profit and loss allocations of
operating income.
⊚ true
⊚ false
23) Separately stated items are tax items that are treated similarly for tax purposes as a
shareholder's share of ordinary business income (loss).
⊚ true
⊚ false
24) S corporations are not entitled to a dividends received deduction.
⊚ true
⊚ false
25) An S corporation shareholder calculates his initial basis upon formation of the corporation
like a C corporation shareholder.
⊚ true
⊚ false
26) As in partnerships, an S corporation shareholder's basis is dynamic and must be adjusted
annually.
⊚ true
⊚ false
27) Unlike in partnerships, adjustments that decrease an S corporation shareholder's basis may
reduce it below zero.
⊚ true
⊚ false
28) In general, an S corporation shareholder makes increasing adjustments to their basis first,
followed by adjustments that decrease basis.
⊚ true
⊚ false
29) S corporation shareholders are not allowed to include any S corporation–level debt in their
stock basis.
⊚ true
⊚ false
Version 1 4
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