S_corp_distributions_solution - Solution S corporation...

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Solution : S corporation distributions and S corporation taxes Part 1: S corporation distributions . Sentry Corp elects S Corp status for calendar year 2010. Prior to this they had operated as a C corporation and at January 1, 2010, Sentry has $20,000 of C corporation accumulated E&P. During 2010, Sentry has $25,000 of ordinary income and $120,000 of municipal bond income. Additionally, Sentry distributes $100,000 to its sole shareholder, Will on December 31, 2010. Will’s basis in his shares at January 1, 2010 was $145,000. Required : How much income does Will have to report as a result of Sentry’s 2010 activities? Distribution from AAA $25,000 (tax-free return) Distribution from accumulated E&P 20,000 (taxable dividend income) Distribution from OAA 55,000 (tax-free return) Total distribution 100,000 Ending balance in: AAA = $25,000 (O.I.) – $25,000 (distribution from AAA) = $0 Accumulated E&P = $20,000 – $20,000 (distribution from E&P) = $0 OAA = 120,000 (t/e interest) – $55,000 (distribution from OAA) = $65,000
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This note was uploaded on 09/09/2011 for the course TAX 5015 taught by Professor Kelliher,c during the Spring '08 term at University of Central Florida.

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S_corp_distributions_solution - Solution S corporation...

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