# S-Corporation Taxation Exercise - Chapter 6.xlsx - Problem...

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Problem 85 1 2 3 On March 31, 2016, Abigail lends \$5,000 of her own money to Lafter. 4 5 Lafter has an accumulated adjustments account balance of \$45,000 as of January 1, 201 6 Lafter also reported \$12,000 of tax-exempt interest income. Abigail: Abigail, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation job and is a passive owner. Consider the following information for 2016 As of January 1, 2016, Abigail, Bobby, and Claudia each have a basis in Lafter stock of \$ shareholder. Bobby and Claudia also are passive owners in Aggressive LLC, which allocated business Lafter, for Claudia). Anticipating the need for basis to deduct a loss, on April 4, 2016, Bobby takes out a \$10,0 as the sole collateral for his loan (nonrecourse). a. What amount of Lafter's 2016 business loss of \$75,000 are Abigail, Bobby, and Claudi applicable) and each owner's at-risk amount with respect to the investment in Lafter at th
Description Debt basis Abigail stock basis January 1, 2016 \$0 15000 10000 Share of tax-exempt income 4000 \$0 (\$25,000) December 31, 2016 \$0 \$4,000 Bobby suspends \$6,000 of the loss at the risk level. Claudia: Description Debt basis Abigail stock basis January 1, 2016 \$0 15000 Share of tax-exempt income 4000 \$0 (\$19,000) December 31, 2016 \$0 \$0 Claudia suspends \$6,000 of the loss at the risk level and \$5,000 of the loss as passive. 7 During 2017, Lafter made several changes to its business approach and reported \$18,00 8 Lafter also reported a long-term capital gain of \$24,000 in 2017. 9 Lafter made a cash distribution on July 1, 2017, of \$20,000 to each shareholder. a. What amount of gain/income does each shareholder recognize from the cash distribu Capital contribution (from nonrecourse loan) Business loss clearing debt basis, and at risk hurdles Claudia is responsible for \$25,000 of the \$75,000 business loss. Claudia is allowed to de LLC was allocated. Business loss clearing debt basis, and at risk hurdles
Description Amount Notes
\$45,000 2016 business loss (\$75,000) (\$30,000) 2017 business income \$18,000 2017 long-term capital gain \$24,000 \$12,000 Distributions \$60,000 \$12,000 of distributions ar \$0 Distribution can reduce AA Description Abigail Bobby Stock basis January 1, 2017 \$0 \$4,000 \$6,000 \$6,000 (\$5,000) \$8,000 \$0 \$9,000 \$10,000 Return of capital portion of distribution \$15,000 \$15,000 (\$6,000) (\$5,000) Capital gain recognized on distribution \$6,000 \$0 Stock basis 12/31/2017 after distributions \$0 (\$5,000) Abigail Recognizes: Dividend Income \$5,000.00 Long Term capital gain \$6,000.00 Basis in Lafter Stock \$0.00 Debt basis at year end \$5,000.00 Bobby Recognizes: accumulated adjustment accounts balance 1/1/2016 accumulated adjustment accounts balance 1/1/2017 accumulated adjustment accounts balance 12/31/2017 before distributions accumulated adjustment accounts balance 12/31/2017 aferdistributions Share of 2013 business income (\$18,000 total)