Question

An entity reports the following income for the current year. Operations $92,000 Tax-exempt interest income 19,000 Long-term capital gain 60,000 The entity holds earnings and profits (AAA for an Scorporation) of $900,000 at the beginning of the year. A distribution of $200,000 is made to the owners. a. Determine the income for each entity type below: (1) If the entity a C corporation then the taxable income is $ 152,000 (2) If the entity is an S-corporation then the ordinary income of the corporation is $ 92,000 and the separately stated taxable items are $ 60,000 ✓ Feedback Check My Work Under the conduit concept, the entity is viewed as merely an extension of the owners. Under the entity concept, the entity is regarded as being separate and distinct from its owners. b. Determine the effect of the distribution on the shareholders for the entity. Assume shareholder have sufficient stock basis. X, the shareholders have dividend income of (1) C corporation: Because the corporation has ending E & P of $ $200,000. (2) S corporation: Shareholders have a return of capital of $200,000.

Answer 1

839080 is correct answer.
Opening Balance. 900000
Add profit earned during the year 171000

(92000+19000+60000)

less :- distribution (200000)

less:- tax @21% on 152000    (31920)

(19000 being tax free)   

Balance 839080