Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $172,500. Carlota's asset is worth $241,500, and Dave's is worth $207,000. a. How much gain, if any, does the the corporation recognize as a result of the distribution? $ 103,500 V b. By how much, if any, does the distribution increase Dave's gross income? $ c. By how much, if any, does the distribution increase Carlota's gross income? $
Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $172,500. Carlota's asset is worth $241,500, and Dave's is worth $207,000. a. How much gain, if any, does the the corporation recognize as a result of the distribution? $ 103,500 V b. By how much, if any, does the distribution increase Dave's gross income? $ c. By how much, if any, does the distribution increase Carlota's gross income? $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA
balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $172,500. Carlota's asset is
worth $241,500, and Dave's is worth $207,000.
a. How much gain, if any, does the the corporation recognize as a result of the distribution?
103,500 V
b. By how much, if any, does the distribution increase Dave's gross income? $
c. By how much, if any, does the distribution increase Carlota's gross income? $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9a1c3239-d719-4792-9e5a-b7537bf13816%2Fd3518422-a650-47c2-89a5-4e45b82fdec2%2F50pmi3b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA
balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $172,500. Carlota's asset is
worth $241,500, and Dave's is worth $207,000.
a. How much gain, if any, does the the corporation recognize as a result of the distribution?
103,500 V
b. By how much, if any, does the distribution increase Dave's gross income? $
c. By how much, if any, does the distribution increase Carlota's gross income? $
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