Facts:Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie hasa basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis inOtter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterpriseshas no debt. Otter Enterprises has $320.000 of gross income and $210.000 of operatingexpenses. In addition. Otter has a long-term capital gain of $15.000 and makesdistributions to Ellie and Linda of $25,000 each.Required:Discuss the impact of this information on the taxable income of Otter. Ellie, and Linda ifOtter is:A. A partnership.B. An S corporation.C. AC corporation.Include in your discussion (1) the amount and character of any income recognized byEllie, Linda, and Otter (including Otter's taxable income and the amount of any tax paidby Otter) in each business entity form; and (2) Ellie and Linda's basis in Otter Enterprisesat the end of the year in each business entity form. Show your work and clearly labelyour answers.

Answer: (A). If Otter may be a partnership, it'll report web standard business financial gain (loss)…

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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