Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie has a basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis in Otter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterprises has no debt. Otter Enterprises has $320,000 of gross income and $210,000 of operating expenses. In addition. Otter has a long-term capital gain of $15.000 and makes distributions to Ellie and Linda of $25,000 each.
Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie has a basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis in Otter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterprises has no debt. Otter Enterprises has $320,000 of gross income and $210,000 of operating expenses. In addition. Otter has a long-term capital gain of $15.000 and makes distributions to Ellie and Linda of $25,000 each.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:Facts:
Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie has
a basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis in
Otter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterprises
has no debt. Otter Enterprises has $320.000 of gross income and $210.000 of operating
expenses. In addition. Otter has a long-term capital gain of $15.000 and makes
distributions to Ellie and Linda of $25,000 each.
Required:
Discuss the impact of this information on the taxable income of Otter. Ellie, and Linda if
Otter is:
A. A partnership.
B. An S corporation.
C. AC corporation.
Include in your discussion (1) the amount and character of any income recognized by
Ellie, Linda, and Otter (including Otter's taxable income and the amount of any tax paid
by Otter) in each business entity form; and (2) Ellie and Linda's basis in Otter Enterprises
at the end of the year in each business entity form. Show your work and clearly label
your answers.
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