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1. Which of the following trusts is eligible to be an S corporation shareholder?

a. Only electing small business trusts.

b. Only eligible foreign trusts.

c. Only qualified subchapter S trust.

d. Only electing small business trusts and qualified subchapter S trusts.

e. All of the above trusts are eligible to be S corporation shareholders.

2. S corporation borrows $5,000 from Bank at 6% interest for one year.

a. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock.

b. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders.

c. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000.

d. Partnership and S corporation tax rules allowing partners/shareholders to increase the basis of partners/shareholders by the amount of partnership/corporation debt are identical.

3. Which of the following statements is correct?

a. A husband and wife count as a single S corporation shareholder.

b. A spouse and that spouses estate count as a single S corporation shareholder.

c. Members of a family with a common ancestor (who meet the six generations test), provided the appropriate election is in effect.

d. All of the above are correct.

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