Unformatted text preview: ls, estates or certain defined trusts.
Choice "d" is incorrect. The election of S corporation status must be made by a qualified corporation with
the unanimous consent of all shareholders. CPA-02273 Type1 M/C 133. CPA-02273 A-D R98 #12 Corr Ans: D PM#39 R 3-99 Page 48 Graphite Corp. has been a calendar year S corporation since its inception on January 2, 1994. On
January 1, 1997, Smith and Tyler each owned 50% of the Graphite stock, in which their respective bases
were $12,000 and $9,000. For the year ended December 31, 1997, Graphite had $80,000 in ordinary
business income and $6,000 in tax-exempt income. Graphite made a $53,000 cash distribution to each
shareholder on December 31, 1997. What total amount of income from Graphite is includible in Smith's
1997 adjusted gross income?
Choice "d" is correct. $40,000 of income from Graphite Corp. is includible in Smith's 1997 adjusted gross
income (on his Form 1040).
Rule: An S corporation...
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