Reference no: EM133340898
PROBLEM 1: A distribution of money is made from an S corporation to its sole shareholder. Determine the tax consequences by completing the table below.
In each case the shareholder's basis is $125,000 at the time of the distribution.
| AAA |
E&P |
Distribution |
Tax Free ROC |
Capital Gain |
Dividend |
End Basis |
End AAA |
| 250,000 |
-0- |
50,000 |
|
|
|
|
|
| 250,000 |
50,000 |
100,000 |
|
|
|
|
|
| 150,000 |
-0- |
100,000 |
|
|
|
|
|
| 150,000 |
250,000 |
150,000 |
|
|
|
|
|
| 50,000 |
-0- |
200,000 |
|
|
|
|
|
| 50,000 |
250,000 |
200,000 |
|
|
|
Part 2: Again, the shareholder's basis is $125,000. There is a distribution of property that has a fair market value of $50,000 and a tax basis to the S corporation of $40,000. What is the result of this distribution? This corporation has AAA of $40,000 BEFORE considering the distribution itself.
| Corp Gain/<Loss> |
Pre-dist AAA |
Distribution Amnt |
ROC |
CG |
End AAA |
End Basis |
| |
|
|
|
|
|
|
PROBLEM 2: An S corporation that was formerly a C corporation sells an asset for $300,000. The asset had a basis to the corporation of $200,000. This asset is subject to the built-in-gains tax, and all of the gain realized from the sale was built-in at the date of conversion from a C corporation to an S corporation.
Part A: What is the result to the S corporation?
Part B: What is reported to the shareholder as a result of this sale?