Hanover, Inc., is an S corporation. Shawn, the sole shareholder, has a stock basis of 10,000 at January 1, 20X1, and an accumulated adjustments account (AAA) balance of $0. Hanover, Inc., has never been a C corporation. For 20X1, the following takes place regarding Hanover, Inc.: Taxable income $40,000 Tax-exempt income $5,000 Capital gain $8,000 Expenses applicable to tax-exempt income $1,000 Charitable contributions $2,000 Disallowed 50% of meal & entertainment expenses $500 Cash distribution to Shawn $20,000 What is the AAA of Hanover, Inc., at December 31,20X1? A. $10,500 B. $17,500 C. $25,500 D. $32,000
Hanover, Inc., is an S corporation. Shawn, the sole shareholder, has a stock basis of 10,000 at January 1, 20X1, and an accumulated adjustments account (AAA) balance of $0. Hanover, Inc., has never been a C corporation. For 20X1, the following takes place regarding Hanover, Inc.: Taxable income $40,000 Tax-exempt income $5,000 Capital gain $8,000 Expenses applicable to tax-exempt income $1,000 Charitable contributions $2,000 Disallowed 50% of meal & entertainment expenses $500 Cash distribution to Shawn $20,000 What is the AAA of Hanover, Inc., at December 31,20X1? A. $10,500 B. $17,500 C. $25,500 D. $32,000
Chapter12: S Corporations
Section: Chapter Questions
Problem 43P
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Transcribed Image Text:Hanover, Inc., is an S corporation. Shawn, the sole shareholder, has a stock basis of 10,000 at
January 1, 20X1, and an accumulated adjustments account (AAA) balance of $0. Hanover, Inc., has
never been a C corporation. For 20X1, the following takes place regarding Hanover, Inc.:
Taxable income
$40,000
Tax-exempt income
$5,000
Capital gain
$8,000
Expenses applicable to tax-exempt income
$1,000
Charitable contributions
$2,000
Disallowed 50% of meal & entertainment expenses $500
Cash distribution to Shawn
$20,000
What is the AAA of Hanover, Inc., at December 31,20X1?
A. $10,500
B. $17,500
C. $25,500
D. $32,000
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