distribution prior to is treated as a distribution as of December

Distribution prior to is treated as a distribution as

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distribution prior to March 15, 2016 is treated as a distribution as of December 31, 2015 for AET purposes. If no S election were made, the distribution would be a dividend in 2016. But if an S corporation election is made by March 15, 2016, it is retroactive to January 1, 2016. Daily earnings of the S corporation are credited to the AAA account and any distribution made by an S corporation is deemed first from the AAA account, second from C corporation E&P if any, then basis, then gain. 143. Ed would be entitled to deduct a loss of $4,000, the amount of his basis in his partnership, for the year 2015. The remaining portion of his loss of $2,000 would be carried over and applied against his share of income for 2016. 144. Fred may claim a $30,000 loss on his 2016 individual return. Fred's share of the Budrock loss is $110,000. However, his deduction is limited to his basis in the partnership, which includes his portion of the partnership liabilities. 145. Snuffbox may deduct $72,000 in dividends received. Snuffbox Corporation has dividend income of $100,000 and taxable income of $90,000 before the dividends received deduction. Being a 20 percent or more corporate shareholder, it is entitled to a deduction of the lesser of 80 percent of domestic dividends or 80 percent of taxable income before the dividends received deduction, unless the dividends received deduction produces a net operating loss, in which case the second test is not applied. As no net operating loss results, the second test limits the deduction. 146. None of the charitable contribution will be available for 2017. Button Corporation's charitable contribution deduction is limited to 10 percent of the corporation's taxable income computed prior to the contribution deduction and the dividends received deduction. The carryover from 2015 plus the deduction for 2016 do not exceed that limit. 147. Only item (a) would not decrease Stuart's basis in the S corporation. If the excess depletion allowable for income tax purposes were to reduce the basis of the S corporation shareholder in his or her stock, the effect would be a mere deferral of income because upon sale of the stock the depletion-reduced basis would generate a greater gain.
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49 Testbank © 2016 CCH Incorporated and its affiliates. All rights reserved. Chapter 16
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