1. An S corporation’s shareholder’s adjusted basis in the shareholder’s stock is used to determine
a. the extent to which a distribution made by the corporation to the shareholder is taxable.
b. the amount of losses that shareholders may deduct in a given year.
c. the shareholder’s realized gain or loss upon the sale or exchange of the stock.
d. all of the above.
2. 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
3. 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.