Nicholas owns 60% of the shares of Orange Corp. (an S corporation with no accumulated E&P). Nicholas purchased his shares at the beginning of 2020 for $1,000. Orange Corp. reported the following during 2020: Ordinary business income: $40,000 Separately stated income items: $3,000 Separately stated loss items: $8,000 In addition, Orange Corp. paid off corporate debt (nonrecourse) of $10,000 in 2020. If Orange Corp. distributed $10,000 to Nicholas on March 1, 2020, what amount of the distribution is treated as capital gain?
Nicholas owns 60% of the shares of Orange Corp. (an S corporation with no accumulated E&P). Nicholas purchased his shares at the beginning of 2020 for $1,000. Orange Corp. reported the following during 2020: Ordinary business income: $40,000 Separately stated income items: $3,000 Separately stated loss items: $8,000 In addition, Orange Corp. paid off corporate debt (nonrecourse) of $10,000 in 2020. If Orange Corp. distributed $10,000 to Nicholas on March 1, 2020, what amount of the distribution is treated as capital gain?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Nicholas owns 60% of the shares of Orange Corp. (an S corporation with no accumulated E&P). Nicholas purchased his shares at the beginning of 2020 for $1,000. Orange Corp. reported the following during 2020:
Ordinary business income: $40,000
Separately stated income items: $3,000
Separately stated loss items: $8,000
In addition, Orange Corp. paid off corporate debt (nonrecourse) of $10,000 in 2020.
If Orange Corp. distributed $10,000 to Nicholas on March 1, 2020, what amount of the distribution is treated as capital gain ?
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