CHAPTER 22 S CORPORATIONS

115.You are a 60% owner of an S corporation. Calculate your ending stock basis, based upon these facts.

Beginning stock basis	$52,600
Purchases of additional stock	15,000
Insurance premiums paid (nondeductible)	3,600
Tax-exempt interest income	5,230
Payroll tax penalty	3,770
Increase in AAA	22,400
Increase in OAA	5,800

116. On December 31, 2014, Erica Sumners owns one share of an S corporation’s 10 outstanding shares of stock. The basis of Erica’s share is $300. During 2015, the S corporation incurs a loss of $3,650. Determine the amount of the loss allocated to Erica, and calculate her stock basis at the end of 2015.

117. Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2014, the date the S election is made.

	Adjusted Basis Fair Market Value $200,000 $200,000 –0– 105,000 110,000 100,000 1,800,000 2,500,000 –0– 110,000

Cash

Accounts receivable Equipment

Land

Accounts payable

During 2014, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax.

118. Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Calculate any passive investment income penalty tax payable by this corporation.

119. Discuss two ways that an S election may be terminated.

120.Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.

121. Explain the OAA concept.

122. Discuss the two methods of allocating tax-related items to S corporation shareholders.

123. Compare the distribution of property rules for an S corporation with the corresponding partnership rules.