Omniocular made a valid S election effective January 1, 2024. Barry and Winnie each own 50 percent of the voting power and have an equal claim on Omniocular's assets in liquidation. In addition, consider the following information: Omniocular reports on a calendar tax year. Omniocular's earnings and profits as of December 31, 2023, were $55,000. Omniocular's 2023 taxable income was $15,000. Omniocular's assets at the end of 2023 are as follows: Omniocular Assets December 31, 2023 Asset Adjusted Basis FMV Cash $ 50,000 $ 50,000 Accounts receivable 20,000 20,000 Investments in stocks and bonds 700,000 700,000 Investment in land 90,000 100,000 Inventory (LIFO) 80,000*Footnote asterisk 125,000 Equipment 40,000 35,000 Totals $ 980,000 $ 1,030,000 *Footnote asterisk$110,000 under FIFO accounting. On March 31, 2024, Omniocular sold the land for $42,000. In 2024, Omniocular sold all the inventory it had on hand at the beginning of the year. This was the only inventory it sold during the year. Other Income or Expense Items for 2024 Sales revenue $ 155,000 Salary to owners (50,000) Employee wages (10,000) Depreciation expense (5,000) Miscellaneous expenses (1,000) Interest income 40,000 Qualified dividend income 65,000 Assume that if Omniocular were a C corporation for 2024, its taxable income would have been $88,500. 1.How much built-in gains tax, if any, is Omniocular required to pay? 2. How much excess net passive income tax, if any, is Omniocular required to pay? 3. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2024. What is his stock basis on December 31, 2024?
Omniocular made a valid S election effective January 1, 2024. Barry and Winnie each own 50 percent of the voting power and have an equal claim on Omniocular's assets in liquidation. In addition, consider the following information: Omniocular reports on a calendar tax year. Omniocular's earnings and profits as of December 31, 2023, were $55,000. Omniocular's 2023 taxable income was $15,000. Omniocular's assets at the end of 2023 are as follows: Omniocular Assets December 31, 2023 Asset Adjusted Basis FMV Cash $ 50,000 $ 50,000 Accounts receivable 20,000 20,000 Investments in stocks and bonds 700,000 700,000 Investment in land 90,000 100,000 Inventory (LIFO) 80,000*Footnote asterisk 125,000 Equipment 40,000 35,000 Totals $ 980,000 $ 1,030,000 *Footnote asterisk$110,000 under FIFO accounting. On March 31, 2024, Omniocular sold the land for $42,000. In 2024, Omniocular sold all the inventory it had on hand at the beginning of the year. This was the only inventory it sold during the year. Other Income or Expense Items for 2024 Sales revenue $ 155,000 Salary to owners (50,000) Employee wages (10,000) Depreciation expense (5,000) Miscellaneous expenses (1,000) Interest income 40,000 Qualified dividend income 65,000 Assume that if Omniocular were a C corporation for 2024, its taxable income would have been $88,500. 1.How much built-in gains tax, if any, is Omniocular required to pay? 2. How much excess net passive income tax, if any, is Omniocular required to pay? 3. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2024. What is his stock basis on December 31, 2024?
Chapter6: Accounting Periods And Other Taxes
Section: Chapter Questions
Problem 7MCQ: B Corporation, a calendar year-end, accrual basis taxpayer, is owned 75 percent by Bonnie, a cash...
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Omniocular made a valid S election effective January 1, 2024. Barry and Winnie each own 50 percent of the voting power and have an equal claim on Omniocular's assets in liquidation. In addition, consider the following information:
Omniocular reports on a calendar tax year.
Omniocular's earnings and profits as of December 31, 2023, were $55,000.
Omniocular's 2023 taxable income was $15,000.
Omniocular's assets at the end of 2023 are as follows:
| Omniocular Assets | ||
| December 31, 2023 | ||
| Asset | Adjusted Basis | FMV |
|---|---|---|
| Cash | $ 50,000 | $ 50,000 |
| 20,000 | 20,000 | |
| Investments in stocks and bonds | 700,000 | 700,000 |
| Investment in land | 90,000 | 100,000 |
| Inventory (LIFO) | 80,000*Footnote asterisk | 125,000 |
| Equipment | 40,000 | 35,000 |
| Totals | $ 980,000 | $ 1,030,000 |
*Footnote asterisk$110,000 under FIFO accounting.
- On March 31, 2024, Omniocular sold the land for $42,000.
- In 2024, Omniocular sold all the inventory it had on hand at the beginning of the year. This was the only inventory it sold during the year.
| Other Income or Expense Items for 2024 | |
| Sales revenue | $ 155,000 |
|---|---|
| Salary to owners | (50,000) |
| Employee wages | (10,000) |
| (5,000) | |
| Miscellaneous expenses | (1,000) |
| Interest income | 40,000 |
| Qualified dividend income | 65,000 |
Assume that if Omniocular were a C corporation for 2024, its taxable income would have been $88,500.
1.How much built-in gains tax, if any, is Omniocular required to pay?
2. How much excess net passive income tax, if any, is Omniocular required to pay?
3. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2024. What is his stock basis on December 31, 2024?
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