At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000 and accumulated E&P of $20,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $20,000 distribution (the remaining shareholders received $30,000 in distributions) (Assume her stock basis is $40.000 after considering her share of Bombay's income for the year but before considering the effects of the distribution) Required: a. What are the amount and character of income or gain Nicolette must recognize from the distribution? b. What is her basis in her Bombay stock at the end of the year? a Dividend b Basis Character Amount $ 8.000
At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000 and accumulated E&P of $20,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $20,000 distribution (the remaining shareholders received $30,000 in distributions) (Assume her stock basis is $40.000 after considering her share of Bombay's income for the year but before considering the effects of the distribution) Required: a. What are the amount and character of income or gain Nicolette must recognize from the distribution? b. What is her basis in her Bombay stock at the end of the year? a Dividend b Basis Character Amount $ 8.000
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:At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000
and accumulated E&P of $20.000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder)
received a $20,000 distribution (the remaining shareholders received $30,000 in distributions) (Assume her stock basis is $40.000
after considering her share of Bombay's income for the year but before considering the effects of the distribution)
Required:
a. What are the amount and character of income or gain Nicolette must recognize from the distribution?
b. What is her basis in her Bombay stock at the end of the year?
a Dividend
b. Basis
Character
Amount
$
8.000
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