To achieve S Corporation status, a corporation must be qualified as a small business corporation.

1. To achieve S Corporation status, a corporation must be qualified as a small business corporation. That requires that it meet a number of requirements that include: (list them below)

2. If a corporation terminates its S Corporation status, how long must it wait before electing the Subchapter S status again? List any exceptions to waiting this period.

3. Moc Corporation reports on the calendar year and has made the S Corporation election. It distributed $200,000 in cash to its only shareholder, Marmi on December 31, 2020. Marmi has a basis in her stock of $225,000 and Moc Corporation has a AAA balance of $125,000 and a AEP balance of $50,000 before the distribution. Knowing this, explain how the distribution will be taxed (if at all) to Marmi.

4.David loaned $100,000 to his S corporation in2020 while he had a basis in the stock of the corporation of $50,000. Regrettably, the S corporation still reported a loss for 2020 of $195,000. Can David use this loss in whole or in part to offset ordinary income that he earned in 2020 in the practice of law? Explain what is allowed as a deduction on his individual income tax return and show how this affects his basis calculations.

5. Tiger Sticks, Inc. is a calendar year S Corporation in Augusta Georgia. On December 31, 2019 it had an ending balance in AAA of $2 million and an ending balance n AEP of $500,000. In 2020 Tiger Sticks, Inc. sustained a temporary setback with a key executive and the K-1 that was received by Goat Woods, its sole shareholder, reported a non-separately stated loss of $1 million and the only separately stated item was for a $25,000 charitable gift. Assume that Goat Woods has sufficient basis.

Calculate the ending balances of AAA and AEP for 2020 on December 31, 2020. (show your work)

6. Dan acquired a vacation home in Aspen paying all of the acquisition price but put the title in the property for Dan and Bunny “as joint tenants with cross contingent remainders in survivorship” Dan was not married at the time but he subsequently married Bunny a few months before he died in a tragic skiing accident. At the time of his death the vacation home was worth $8.5 million and he had paid $925,000 for the home 8 years ago. Dan’s entire estate was well over $20 million dollars without considering the Aspen home.

Is the Aspen home included in Dan’s Probate Estate? (why or why not)
What is the value that the home is included in Dan’s gross estate for federal estate tax purposes? (explain)

7. Norman invested $120,000 in a 2 year certificate of deposit at the First Bank of Bouregard just around the corner from where he lived in a trailer. He put the title to the CD as follows: “Norman Waites, Payable on Death (POD) to Jacky Jumper”. Jacky did not know about this. She was a waiter at the Greasy Spoon, the only restaurant in Bouregard. Norman always wanted to talk to her but he was just too shy to do so. Did Norman make a gift to Jacky that was subject to the federal gift tax when he made the designation? (explain why or why not)

8. John acquires a life insurance policy on his own life and pays all of the premiums himself. He names his wife, Sue, the beneficiary and at the suggestion of the insurance agent he names his estate as the secondary beneficiary. John dies and is survived by Sue. Is the insurance included in John’s estate for federal estate tax purposes? If so, how is it valued for purposes of this inclusion?

9. Qualified tuition programs under “Section 529” enjoy significant tax advantages with regard to the federal: (1) Income tax, (2) Gift Tax, and (3) Estate Tax. Explain generally these tax advantages.

10. Ravin Raines was a participant was a participant in the YellerWood, Inc. contributory qualified pension plan. When she died her account reflected the following:

$290,000 employer contribution
$340,000 Ravin’s contribution
$370,000 Income earned and accumulated by the qualified plan

a. What amount from the qualified Plan is included in Ravin’s estate for estate tax purposes?

b. If the whole balance is paid to Ravin’s surviving husband under her will, how much of a marital deduction will the estate receive for estate tax purposes?