Reference no: EM132761777
CSU, Inc., is a calendar year S corporation. CSU's Form 1120S shows nonseparately stated ordinary income of $120,000 for the year. Taewon owns 30% of the CSU stock throughout the year. The following information is obtained from the corporate records.
Tax-exempt interest income $ 4,500
Salary paid to Taewon (78,000)
Charitable contributions (9,000)
Dividends received from a non-U.S. corporation 7,500
Short-term capital loss (9,000)
Depreciation recapture income 16,500
Refund of prior state income taxes 7,500
Cost of goods sold ($108,000)
Long-term capital loss (10,500)
Administrative expenses (27,000)
Long-term capital gain 21,000
Selling expenses (16,500)
Taewon's beginning stock basis 48,000
Taewon's additional stock purchases 13,500
Beginning AAA 46,500 Taewon's loan to corporation 30,000
Problem 1: Assume all facts remain the same and CSU had previously been a C corporation and had 60,000 of E& P. Show the effect, if any, of the distribution on Taewon's stock basis, ending AAA, ending E&P. Show also the taxability, if any, of the distribution to Taewon. HINT: calculate the allocation of AAA to Taewon for distribution computations, even though AAA is a corporate account.
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