16 an s corporation has ten shareholders and it is

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16. An S corporation has ten shareholders, and it is fourteen months late filing its tax return. What is the penalty for failure to file? 17. Tip Corporation is a calendar-year S corporation with 10,000 shares outstanding, 2,000 of which are owned by Will and 8,000 of which are owned by Nancy. During the year Tip has ordinary business income of $540,000 and a long term capital gain of $230,000 from a transaction that occurred on April 3. On 11/1 Nancy sells Yolanda 3000 of her shares. How would the income be allocated to each shareholder?
Practical Guide to Partnerships and LLCs—Instructor’s Guide Problems 7 ©2015 CCH Incorporated. All Rights Reserved. 18. Maria is a sole shareholder in Austin Corporation, an S corporation. At the beginning of last year, her basis in her Austin stock was $300,000. Austin also had debt of $150,000 it owed to unrelated parties. During last year she loaned Austin $250,000, and it generated a loss of $400,000. What was her basis in the stock and the loan at the end of last year? Assume the facts of the previous problem. Suppose that in the current year the income of Austin is $220,000. What would be Maria’s basis in the stock and the loan at the end of the current year?
Practical Guide to Partnerships and LLCs—Instructor’s Guide Problems 8 ©2015 CCH Incorporated. All Rights Reserved. Reading: Paragraphs 1604-1605. 19. R Inc. is an S corporation with no E&P. It has three shareholders: J, D and Q. The shareholders’ tax basis in their R shares is as follows: Shareholder Number of Shares Tax Basis J 3,200 $150,000 D 4,800 50,000 Q 8,000 200,000 In the current year, R distributed $240,000 to the shareholders. a. Assume that the distribution was divided equally among the shareholders: $80,000 each. Would R qualify for classification as an S corporation? Explain. b. Assume instead that the distribution was divided proportionally among the shareholders, based on the number of shares each owns: $48,000 to J, $72,000 to D, and $120,000 to Q. How much income would each shareholder recognize in connection with the distribution, and what would be its character? c. In question b above, what would be each shareholder’s remaining basis in his or her R stock after receipt of the distribution?
Practical Guide to Partnerships and LLCs—Instructor’s Guide Problems 9 ©2015 CCH Incorporated. All Rights Reserved. d. Assume that in addition to the amount invested in R, Inc. for shares of stock, D also loaned $100,000 to the company. If the principal balance of the loan at the date of the distributions had been $62,000, how would your answer in b above change. 20. Q Inc. is owned by L and R. Q Inc. is an S corporation, but in prior years it was a regular corporation and it has a remaining E&P balance from those prior years of $60,000. The corporation’s AAA balance at the beginning of the year was $35,000, and it reported taxable income of $42,000. At the beginning of the year, L's tax basis in her Q Inc. stock was $25,000. R's tax basis in his Q Inc. stock (also at the beginning of the year) was only $10,000. The corporation distributed $100,000 to its two shareholders this year ($50,000 each). a. What portion of the distribution will be taxable to the shareholders as dividend income? b. Will either shareholder recognize any capital gain on receipt of the

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