Pine Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Connor, who has always operated it as a C corporation. However, at the beginning of this year, Connor made a qualifying S election for Pine Corporation, effective January 1. Pine Corporation reported $70,000 of C corporation earnings and profits on the effective date of the S election. This year (its first S corporation year), Pine Corporation reported business income of $50,000. Connor's basis in his Pine Corporation stock at the beginning of the year was $15,000. What are the amount and character of income or gain Connor must recognize on the following alternative distributions, and what is his basis in his Pine Corporation stock at the end of the year? (Leave no answer blank. Enter zero if applicable. Enter N/A if not applicable.) c. Connor received a $130,000 distribution from Pine Corporation at the end of the year. Character Amount Dividend N/A Stock basis
Pine Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Connor, who has always operated it as a C corporation. However, at the beginning of this year, Connor made a qualifying S election for Pine Corporation, effective January 1. Pine Corporation reported $70,000 of C corporation earnings and profits on the effective date of the S election. This year (its first S corporation year), Pine Corporation reported business income of $50,000. Connor's basis in his Pine Corporation stock at the beginning of the year was $15,000. What are the amount and character of income or gain Connor must recognize on the following alternative distributions, and what is his basis in his Pine Corporation stock at the end of the year? (Leave no answer blank. Enter zero if applicable. Enter N/A if not applicable.) c. Connor received a $130,000 distribution from Pine Corporation at the end of the year. Character Amount Dividend N/A Stock basis
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Pine Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Connor, who has
always operated it as a C corporation. However, at the beginning of this year, Connor made a qualifying S election for Pine
Corporation, effective January 1. Pine Corporation reported $70,000 of C corporation earnings and profits on the effective
date of the S election. This year (its first S corporation year), Pine Corporation reported business income of $50,000.
Connor's basis in his Pine Corporation stock at the beginning of the year was $15,000.
What are the amount and character of income or gain Connor must recognize on the following alternative distributions,
and what is his basis in his Pine Corporation stock at the end of the year? (Leave no answer blank. Enter zero if
applicable. Enter N/A if not applicable.)
c. Connor received a $130,000 distribution from Pine Corporation at the end of the year.
Character
Amount
Dividend
N/A
Stock basis
Expert Solution
Step 1
Introduction:-
A dividend is a payment given to stakeholders by a corporation. When a firm makes a profit or has a surplus, it can pay a dividend to its shareholders. Any money that isn't distributed is re-invested back into the business (called retained earnings). The current year's earnings, as well as retained gains from previous years, are available for distribution; however, a company is normally prohibited from paying a dividend out of its capital. If the company has a dividend reinvestment plan, the money might be given to shareholders in cash (usually a deposit into a bank account), new shares, or share buybacks.
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