ch 22 solutions - 12-1Chapter 12 SolutionsS...

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Unformatted text preview: 12-1Chapter 12 SolutionsS Corporations (2011 edition) updated: August 13, 2, 201025. Sales $141,000Depreciation recapture income 12,000$153,000Cost of goods sold $45,000Administrative expenses 15,000Depreciation expense 21,000 (81,000)Nonseparately computed income $ 72,000p. 12-11 and Example 1726. AAA StockBasisAEPBeginning balance $2,000 $10,000 $6,000Distribution ($6,000) (2,000) (2,000) (4,000)Balance $ –0– $ 8,000 $2,000LTCG 2,000 2,000 –0–Balance $2,000 $10,000 $2,000Loss ($9,000) (9,000) (9,000) No effectEnding balance ($7,000) $ 1,000 $2,000pp. 12-15, 12-16, 12-20 to 12-25, Example 23, and Exhibit 12.128. Book income $101,000Add: Long-term capital loss 9,000$110,000Deduct:Dividends received $9,000Tax-exempt interest 2,000§ 1231 gain 6,000Short-term capital gain 3,000 (20,000)Ordinary income $ 90,000p. 12-11 and Example 1731. A capital gain of $80,000 ($220,000 – $140,000) is reported at the S corporation level, and eachshareholder includes a flow-through of $20,000 ($80,000 ÷ 4). Donald’s basis in the S corporationbecomes $90,000 ($290,000 – $220,000 + $20,000). pp. 12-13, 12-19, 12-20, and ConceptSummary 12.234. There will be a $30,000 negative balance in AAA, and AEP remains at $55,000.AAA AEPBeginning balance, 1-1-10 $100,000 $55,000Less: Distributions (70,000) (–0–)Less: Loss (60,000) (–0–)Ending balance ($ 30,000) $55,000In this case, AAA is adjusted first for the distributions and then for the loss. However, the negativebalance must be restored to a positive balance before the shareholders may receive anydistributions that will not be taxed as dividend income. pp. 12-15, 12-16, and Exhibit 12.112-235. a. Beginning stock basis $22,000Add:Ordinary income $16,000Dividend income 6,000Tax-exempt interest 9,000STCG 3,000Section 1231 gain 3,500 37,500$59,500Less:Charitable contributions $ 2,500Political contributions 4,000STCL 6,000Distributions to Malcolm 9,500 (22,000)Ending stock basis $37,500p. 12-20b. Beginning AAA $40,000Add:Ordinary income $32,000Dividends received 12,000STCG 6,000Section 1231 gain 7,000 57,000$97,000Less:Charitable contributions $ 5,000Political contributions 8,000STCL 12,000Distributions to Malcolm 9,500 (34,500)Ending AAA $62,500pp. 12-15, 12-16, and Exhibit 12.136. On the distribution of the securities, there is a recognized gain of $200,000 to Money, Inc. ($136....
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This note was uploaded on 11/09/2010 for the course TAX 440 taught by Professor Apple during the Spring '10 term at The University of Akron.

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ch 22 solutions - 12-1Chapter 12 SolutionsS...

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