[16] Disallowed passive losses or credits may be carried forward indefinitely or

Question

[16] Disallowed passive losses or credits may be carried forward indefinitely or carried back for

A. 5 years.

B. 2 years.

C. No carryback is allowed.

D. 3 years.

[17] Able Corporation had an earnings and profits balance of $8,000 on December 31 of the current year before distributions. Able made a distribution of $15,000 on December 31 of the current year to Siggy, an individual shareholder. The adjusted basis of Siggy’s stock in Able is $12,000. What amount should Siggy include as dividend income, and what is his basis in the stock after the distribution?

Dividend Income .....................Basis

A. $12,000 .............................$9,000

B. $15,000 ............................$12,000

C. $8,000 .............................$5,000

D. $8,000 .............................$12,000

[18] What is the maximum number of shareholders allowable for eligibility as an S corporation in the current year?

A. 100

B. 15

C. 25

D. 75

[19] Alex owns 100% of Boxer Corporation. Boxer is an S corporation with a basis of $24,000 to Alex. Boxer uses a calendar tax year and had the following results in the current year:

            Ordinary income                     $90,000

            Cash distribution to Alex        25,000

            Tax-exempt income                10,000

            Net long-term capital gains       5,000

What is Alex’s basis in the Boxer at the end of the year?

A. $119,000

B. $94,000

C. $24,000

D. $104,000

[20] You own 100% of Ricochet, Inc., and S Corporation that is filing returns on a calendar year. For the current tax year, the corporation has an operating loss of $11,000 and separately stated tax-exempt income of $10,000. Your basis at the beginning of the current year is $2,000. What is the basis at the end of this year?

A. $0

B. $1,000

C. $11,000

D. $2,000

Explanation / Answer

Solution:

16) The correct option is C. No Carryback is allowed

Disallowed credits arising from passive activities, like disallowed deductions, can be carried forward indefinitely but cannot be carried back.

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