e sole shareholder in Helio, Inc., a calendar-year corporation. After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015. At the beginning of 2021, Daniel had a stock basis in Hello of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000. This year, Daniel receives a $50,000 distribution. Per his k-1 from Helio, Inc., Daniel has a $4,000 long term capital gain and $10,000 of non-separately stated income. a. Determine Daniel's ending balance in AAA, AEP and stock basis. b. How much income, gain or loss with Daniel have as a result of his interest in Helio, inc.? Be specific. c. Daniel said, "I'm so happy that converted from being a C corporation to an 5-corporation-since I know that I can get the $50,000 cash out of the business without tax. Dur
e sole shareholder in Helio, Inc., a calendar-year corporation. After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015. At the beginning of 2021, Daniel had a stock basis in Hello of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000. This year, Daniel receives a $50,000 distribution. Per his k-1 from Helio, Inc., Daniel has a $4,000 long term capital gain and $10,000 of non-separately stated income. a. Determine Daniel's ending balance in AAA, AEP and stock basis. b. How much income, gain or loss with Daniel have as a result of his interest in Helio, inc.? Be specific. c. Daniel said, "I'm so happy that converted from being a C corporation to an 5-corporation-since I know that I can get the $50,000 cash out of the business without tax. Dur
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Daniel is the sole shareholder in Helio, Inc., a calendar-year corporation. After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015. At the beginning of 2021, Daniel had a stock basis in Hello of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000.
This year, Daniel receives a $50,000 distribution. Per his k-1 from Helio, Inc., Daniel has a $4,000 long term capital gain and $10,000 of non-separately stated income.
a. Determine Daniel's ending balance in AAA, AEP and stock basis.
b.
How much income, gain or loss with Daniel have as a result of his interest in Helio, inc.? Be
specific.
c. Daniel said, "I'm so happy that converted from being a C corporation to an 5-corporation-since I know that I can get the $50,000 cash out of the business without tax. During the C corp days, the $50,000 would have been subject to a 21% tax." How would you respond to Daniel?
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