S Corporation Shareholders Who Own More Than 2% of the Outstanding

question 84

Multiple Choice

S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax-free benefits?

• A)group term life insurance exclusion under Sec.79 for premiums paid for up to $50,000 coverage
• B)exclusion for cafeteria plan benefits
• C)exclusion from income for premiums paid for accident and health and medical reimbursement plans
• D)none of the above

---

Definitions:

Drawing Account

An account that tracks the money or goods withdrawn from a business by its owners for personal use.

Capital Account

A financial statement that shows the changes in ownership interest of a company over a period.

Noncumulative

Pertains to dividends or other rights that do not accumulate if not paid or exercised in the period they are due.

Dividends in Arrears

Unpaid dividends on cumulative preferred stock which must be paid out before any dividends can be distributed to common stockholders.