Queen owns 100% of Royal Corporation. Royal Corporation was originally formed as a C corporation but has since elected to be treated as an S corporation. At the end of 2020, before considering any distributions, Royal Corporation's accumulated adjustments account (AAA) balance was $55,000 and its accumulated earnings and profits from its years as a C corporation was $20,000. On December 31, Royal Corporation distributed $80,000 to Queen. What is the amount and character of income Queen must recognize on the distribution if her stock basis before considering the distribution was $100,000? What is Queen's stock basis after accounting for the distribution?
Queen owns 100% of Royal Corporation. Royal Corporation was originally formed as a C corporation but has since elected to be treated as an S corporation. At the end of 2020, before considering any distributions, Royal Corporation's accumulated adjustments account (AAA) balance was $55,000 and its accumulated earnings and profits from its years as a C corporation was $20,000. On December 31, Royal Corporation distributed $80,000 to Queen. What is the amount and character of income Queen must recognize on the distribution if her stock basis before considering the distribution was $100,000? What is Queen's stock basis after accounting for the distribution?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Queen owns 100% of Royal Corporation. Royal Corporation was originally formed as a C corporation but has since elected to be treated as an S corporation. At the end of 2020, before considering any distributions, Royal Corporation's accumulated adjustments account (AAA) balance was $55,000 and its
- What is the amount and character of income Queen must recognize on the distribution if her stock basis before considering the distribution was $100,000?
- What is Queen's stock basis after accounting for the distribution?
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