For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular's S election, effective August 1, 2025. In 2025, Omniocular reported the following income or expense items: January 1—July 31, 2025 (212 days) August 1—December 31, 2025 (153 days) January 1—December 31, 2025 Sales revenue $ 80,000 $ 185,000 $ 265,000 Cost of goods sold (40,000) (20,000) (60,000) Salaries to Barry and Winnie (60,000) (40,000) (100,000) Depreciation expense (7,000) (2,000) (9,000) Miscellaneous expenses (4,000) (3,000) (7,000) Interest income 6,000 5,250 11,250 Overall net income (loss) $ (25,000) $ 125,250 $ 100,250 For tax purposes, how would you recommend Barry and Winnie allocate income between the short S corporation year and the short C corporation year if they would like to minimize double taxation of Omniocular's income? Assume in part (f) that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barry's stock basis in his Omniocular stock on January 1, 2025, is $50,000, what is his stock basis on December 31, 2025?
For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular's S election, effective August 1, 2025. In 2025, Omniocular reported the following income or expense items: January 1—July 31, 2025 (212 days) August 1—December 31, 2025 (153 days) January 1—December 31, 2025 Sales revenue $ 80,000 $ 185,000 $ 265,000 Cost of goods sold (40,000) (20,000) (60,000) Salaries to Barry and Winnie (60,000) (40,000) (100,000) Depreciation expense (7,000) (2,000) (9,000) Miscellaneous expenses (4,000) (3,000) (7,000) Interest income 6,000 5,250 11,250 Overall net income (loss) $ (25,000) $ 125,250 $ 100,250 For tax purposes, how would you recommend Barry and Winnie allocate income between the short S corporation year and the short C corporation year if they would like to minimize double taxation of Omniocular's income? Assume in part (f) that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barry's stock basis in his Omniocular stock on January 1, 2025, is $50,000, what is his stock basis on December 31, 2025?
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 45P
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For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular's S election, effective August 1, 2025.
- In 2025, Omniocular reported the following income or expense items:
| January 1—July 31, 2025 (212 days) | August 1—December 31, 2025 (153 days) | January 1—December 31, 2025 | |
|---|---|---|---|
| Sales revenue | $ 80,000 | $ 185,000 | $ 265,000 |
| Cost of goods sold | (40,000) | (20,000) | (60,000) |
| Salaries to Barry and Winnie | (60,000) | (40,000) | (100,000) |
| (7,000) | (2,000) | (9,000) | |
| Miscellaneous expenses | (4,000) | (3,000) | (7,000) |
| Interest income | 6,000 | 5,250 | 11,250 |
| Overall net income (loss) | $ (25,000) | $ 125,250 | $ 100,250 |
- For tax purposes, how would you recommend Barry and Winnie allocate income between the short S corporation year and the short C corporation year if they would like to minimize double
taxation of Omniocular's income? - Assume in part (f) that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barry's stock basis in his Omniocular stock on January 1, 2025, is $50,000, what is his stock basis on December 31, 2025?
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