QUESTION #1 (TCOs 1 and 10) Which statement is incorrect?

A. S-Corporations are treated as corporations under state law.

B. S-Corporations resemble partnerships under the federal income tax law.

C. The alternative minimum tax applies to some S-Corporations.

D. An S-Corporation may not allocate income and deduction items to specific shareholders like a partnership does.

E. None of the above

QUESTION #2 (TCOs 1 and 10) On January 2, 2014, David loans his S-Corporation $10,000. By the end of 2014, David's stock basis is zero, and the basis in his note has been reduced to $8,000. During 2015, the company's operating income is $10,000. The company also makes distributions to David of $8,000. Which of the following is correct?

A. Loan basis is now $10,000.

B. $8,000 LTCG

C. Stock basis is $2,000.

D. $2,000 LTCG

E. None of the above