ABC, an S corporation, has net ordinary income from sales of its products of $5,000. During the year, ABC distributes $12,000 cash to XYZ, its sole shareholder. XYZ's in ABC stock, before the net ordinary income and cash distribution are considered, is $4,000 and ABC owes XYZ $2,000. ABC has been an S corporation since it was formed. XYZ has includable income from ABC of: A) $5,000 ordinary income and $6,000 capital gain B) $5,000 ordinary income and $3,000 capital gain C) $5,000 ordinary income and $1,000 capital gain D) $11,000 ordinary income and zero capital gain E) $8,000 ordinary income and zero capital gain
ABC, an S corporation, has net ordinary income from sales of its products of $5,000. During the year, ABC distributes $12,000 cash to XYZ, its sole shareholder. XYZ's in ABC stock, before the net ordinary income and cash distribution are considered, is $4,000 and ABC owes XYZ $2,000. ABC has been an S corporation since it was formed. XYZ has includable income from ABC of: A) $5,000 ordinary income and $6,000 capital gain B) $5,000 ordinary income and $3,000 capital gain C) $5,000 ordinary income and $1,000 capital gain D) $11,000 ordinary income and zero capital gain E) $8,000 ordinary income and zero capital gain
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter15: S Corporations
Section: Chapter Questions
Problem 2CE
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Transcribed Image Text:ABC, an S corporation, has net ordinary income from
sales of its products of $5,000. During the year, ABC
distributes $12,000 cash to XYZ, its sole shareholder.
XYZ's in ABC stock, before the net ordinary income
and cash distribution are considered, is $4,000 and
ABC owes XYZ $2,000. ABC has been an S
corporation since it was formed. XYZ has includable
income from ABC of:
A) $5,000 ordinary income and $6,000 capital gain
B) $5,000 ordinary income and $3,000 capital gain
C) $5,000 ordinary income and $1,000 capital gain
D) $11,000 ordinary income and zero capital gain
E) $8,000 ordinary income and zero capital gain
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