38. Which of the following tax consequences is not determined by reference to a

Question

38.        Which of the following tax consequences is not determined by reference to a shareholder’s adjusted basis in the shareholder’s stock in an S corporation?

a.         the extent to which a distribution made by the corporation to the shareholder is taxable

b.         the amount of losses that the shareholder may deduct in a given year

c.          the shareholder’s realized gain or loss upon the sale or exchange of the stock

d.         the amount of distributions to which the shareholder is entitled in a given year

39.        Net passive investment income may cause an S corporation to lose S status

a.         if it exceeds 30% of the corporation’s adjusted gross income for 3 consecutive tax years.

b.         unless the corporation was not previously a C corporation.

c.          if it is a successor to a C corporation having assets in excess of $10 million fair market value.

d.         if the passive investment income was generated by real estate investments.

PLEASE ANSWER BOTH! & EXPLAIN

Explanation / Answer

Ans 38: The given options A, B, C are the required to determine S corporation’s shareholder’s adjusted basis in the shareholder’s stock.

Ans 39: if it exceeds 30% of the corporation’s adjusted gross income for 3 consecutive tax years.

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