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. 1. Identify which of the following statements is true: C Corporation operating losses are deductible...

. 1. Identify which of the following statements is true:

C Corporation operating losses are deductible by the individual shareholders

S Corporation operating losses are never deductible by the individual shareholders.

If an S Corporation has no accumulated earnings and profits, the amount distributed to a shareholder will not increase the shareholder's basis in the stock

If a C Corporation does not distribute its income to its shareholders, double taxation of the income will occur.

2. The adjusted basis of Jody's partnership interest was $30,000 immediately before Jody received a current distribution of $40,000 cash and property with an adjusted basis to the partnership of $30,000 and a fair market value of $50,000. What amount of taxable gain must Jody report as a result of this distribution?

$20,000

$40,000

$0

$10,000
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Answer #1

Answer to question 1: option B is true. logic behind the answer is, company and individual shareholder both have different identity. since the individual shareholders are owner of the cpmpany but company have different identity from its shareholder.

Answer to question 2 : option A is correct answer. Fair market value of cash and property is $50,000 and the value of interest is $20,000. so difference of $ 20,000 will be taxable gain

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