None Hanover, Inc., is an S corporation. Shawn, the sole shareholder, has a stock basis of 10,000 atJanuary 1, 20X1, and an accumulated adjustments account (AAA) balance of $0. Hanover, Inc., hasnever been a C corporation. For 20X1, the following takes place regarding Hanover, Inc.:Taxable income$40,000Tax-exempt income$5,000Capital gain$8,000Expenses applicable to tax-exempt income$1,000Charitable contributions$2,000Disallowed 50% of meal & entertainment expenses $500Cash distribution to Shawn$20,000What is the AAA of Hanover, Inc., at December 31,20X1?A. $10,500B. $17,500C. $25,500D. $32,000

Step 1: Introduction to the Capital GainThe profit made by holding a capital asset (Stock, Land,…

Answered: Hanover, Inc., is an S corporation.…

SWFT Comprehensive Vol 2020

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Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 37P

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Corporation P owns 93 percent of the outstanding stock of Corporation T. This year, the corporation’s records provide the following information: Corporation P Corporation T Ordinary operating income (loss) $ 670,000 $ (285,000) Capital gain (loss) (7,000) 7,700 Section 1231 gain (loss) (1,650) 7,200 Required: Compute each corporation’s taxable income if each files a separate tax return.
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) (66,000) (56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales revenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) c. Johnstone distributed $17,200 to Marcus in year 2. Accumulated adjustments account Dividend income
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) (4,600) 12,540 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income $ 8,440 What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) a. Johnstone distributed $7,200 to Marcus in year 2. Accumulated adjustments account Dividend income
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) (56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales revenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) d. Johnstone distributed $27,200 to Marcus in year 2. Accumulated adjustments account Dividend income
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) b. Johnstone distributed $11,200 to Marcus in year 2. Accumulated adjustments account $ Dividend income
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6. Complete the table below for the 100% shareholder of the S-corporation. Schedule M-2 Accumulated Schedule M-2 Other Schedule M-2 Earnings and Tax basis in Adjustment Adjustments S-Corp event stock Account Account Profits account Capital gains Amounts on Jan. 1, 2024 30,000 10,000 3,000 20,000 What is the effect if the S-corporation has taxable profit of $50,000 in 2024? What is the effect if the S-corporation makes a $62,000 cash distribution in 2024? What is the effect if the S-corporation makes a $21,000 cash distribution in 2025, and there is no income or loss? What is the effect if the S-corporation makes a $20,000 cash distribution in 2026, and there is no income or loss? What are the balances at the end of 2026?
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XYZ Corporation, a calendar year C Corporation, has $100,000 gross business receipts, $5,000 interest income from corporate bonds, $20,000 qualified dividend income from a 5% owned C Corporation, $110,000 business expenses, and $2,000 charitable contribution. How much is XYZ's taxable income (or net operating loss) for the current year?\\n\\nGroup of answer choices\\n\\n$0 Taxable income.\\n\\n$3,000 Taxable income.\\n\\n$6,500 Taxable income.\\n\\n$6,750 Taxable income.

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