Tiger Corp is a calendar year taxpayer that elected S status in its first year of operations. Tiger is owned by Harbert (600 shares with beginning AB = $12,000) and Leath (400 shares with beginning AB = $8000). The income statement for Tiger Corp is presented below. The corporation’s beginning AAA balance was -$30,000, OAA was $1,000, and Accumulated E&P from prior years as a C corp was $1,000.Sales Revenue $105,000Municipal bond income$5,000Cost of goods sold ($45,000)Salary expense to owners($20,000)Employee wages ($5,000)Net STCG stock sale $2,000Depreciation expense($10,000)Charitable contributions($1,000)Fines and Penalties ($2,000)Net Income $29,000Tax depreciation is $15,000 of which $5,000 is Sec. 179 depreciation. Tiger Corp also made a $10,000 distribution.Provide a book-tax reconciliation above and distinguish between ordinary business income (loss) and separately stated items (taxable and nontaxable).Determine the ending balances in all entity level accounts after the distributionDetermine Harbert’s ending adjusted basis.What is the tax treatment of the distribution to Harbert?

Any revenue derived from operations is considered ordinary income. Business income from selling a…

Answered: Tiger Corp is a calendar year taxpayer…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Tiger Corp is a calendar year taxpayer that elected S status in its first year of operations. Tiger is owned by Harbert (600 shares with beginning AB = $12,000) and Leath (400 shares with beginning AB = $8000). The income statement for Tiger Corp is presented below. The corporation’s beginning AAA balance was -$30,000, OAA was $1,000, and Accumulated E&P from prior years as a C corp was $1,000.

Sales Revenue		$105,000
Municipal bond income	$5,000
Cost of goods sold		($45,000)
Salary expense to owners	($20,000)
Employee wages		($5,000)
Net STCG stock sale		$2,000
Depreciation expense	($10,000)
Charitable contributions	($1,000)
Fines and Penalties		($2,000)
Net Income		$29,000

Tax depreciation is $15,000 of which $5,000 is Sec. 179 depreciation. Tiger Corp also made a $10,000 distribution.

Provide a book-tax reconciliation above and distinguish between ordinary business income (loss) and separately stated items (taxable and nontaxable).
Determine the ending balances in all entity level accounts after the distribution
Determine Harbert’s ending adjusted basis.
What is the tax treatment of the distribution to Harbert?

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