Multiple choice

1) Identify which of the following statements is true.

A. Shareholders who acquire stock in an S corporation after the election date and prior to the election's effective date must consent to the election. 

B. S corporation consent by shareholders is binding on the current tax year and all future tax years. 

C. Only shareholders who own stock on the date an S election takes effect must consent to the election. 

D. All are false. 

2) Which one of the following individuals or entities is ineligible to be an S corporation shareholder?

A. Resident alien of the United States 

B. A partnership where all of the partners are U.S. citizens 

C. A voting trust where all of the beneficiaries are U.S. citizens 

D. An estate 

3) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2008. Tex and Shirley each own 50% of the stock. Cactus does not make any distributions during 2008, but had $200,000 of ordinary income. In 2009, ordinary income was $100,000 and distributions were $100,000. What is Tex's ordinary income for 2009?

A. $50,000 

B. $200,000 

C. $100,000 

D. $0 

4) Matt and Joel are equal partners in the MJ Partnership. For the current year ended December 31, the partnership has book income of $80,000, which includes the following deductions: (1) guaranteed payments (salaries) to partners: Matt, $35,000; and Joel, $25,000; and (2) charitable contributions, $6,000. The book income amount does not include any sales of capital assets or Sec. 1231 assets or any tax-exempt income. Based on the above information, what amount should be reported as ordinary income on the partnership return?

A. $80,000 

B. $140,000 

C. $86,000 

D. $60,000