ch 22 solutions

# 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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