2. The S corporation election, once made, can be terminated. How? Discuss how an S election...

2. The S corporation election, once made, can be terminated. How? Discuss how an S election might terminate.

3. Dana owns a one-third capital and profits interest in the Spendalot Partners partnership. The partnership uses the calendar year. Her partnership interest had a basis to her of $240,000. This year, the partnership distributes the following assets to Dana: (1) cash of $280,000; and (2) stocks held for investment, having a basis of $60,000 to the partnership, and a fair market value of $120,000.

(a) What is Dana’s recognized gain or loss on the distribution?

(b) What basis does she take in the stock?

(c) What is her basis in her partnership interest after the distribution

Expert Solution

I have only answered the 3 question.

Sol.2)

S election once made can be terminated by the revocation.
Shareholder's who has more than one half share of the company must consent to revocation.
If the corporation ceases to be a small corporation and want to expand its operation.
When investment income exceeds 25% of gross receipt for three consecutive years.
Accumulated profit and earnings for three consecutive years.

Sol. 3) The recognized gain is calculated by deducting the partnership basis from the distributed cash amount.

b) $60,000 is the stock held in investment and when the investment is distributed, the lesser of carryover basis of $60,000 or dana remaining basis of $0. The $0 will be basis she will take in the stock after the cash distribution.

c) $0 will be her basis in partnership interest after the cash distribution.

Recognized Gain = Distributed Cash Amount - Partnership Basis

We were unable to transcribe this image

ekkarill92 answered 1 year ago

why is the election for s corporation status attractive?

1. Complete the following statements regarding the election of S corporation status. A qualifying election requires...

1. Complete the following statements regarding the election of S corporation status. A qualifying election requires the consent of (the majority/at least 80%/all) of the corporation's shareholders. The election is made on (Form 1120S/Form 1065/Form 2553). For S corporation status to apply in the current tax year, the election must be filed either (on the date of incorporation/in the previous year) or on or before the fifteenth day of the (first/third/fourth/sixth) month of the current year. 2. Complete the following...

List five disadvantages of making an S election. (Select all that apply.) A. An S corporation...

List five disadvantages of making an S election. (Select all that apply.) A. An S corporation is subject to the personal holding company tax or the accumulated earnings tax if they elect to have a year-end that is not a calendar year end. B. Allocation of ordinary income or loss and the separately stated items is based on the stock owned on each day of the tax year. Special allocations of particular items are not permitted, as they are in...

Which corporation is eligible to make the S election? A- Foreign corporation. B- A one-shareholder corporation....

Which corporation is eligible to make the S election? A- Foreign corporation. B- A one-shareholder corporation. C- An insurance company D- A US. bank E- None of the above can select S status.

The IRS may not waive an invalid S corporation election if the failure is caused by:...

The IRS may not waive an invalid S corporation election if the failure is caused by: A. a failure to obtain required consents. B. a reasonable cause for a late election. C. a shareholder refusing to sign the consent during the IRS-approved extension period. D. an inadvertent failure to qualify as a small business corporation based on extenuating circumstances.

Discuss how African Americans lived during this era (1830's-1920's and the contributions that were made. Discuss...

Discuss how African Americans lived during this era (1830's-1920's and the contributions that were made. Discuss the population of African Americans in comparison to Whites in Cleveland, Ohio.

C Corporation has an S corporation election in effect. During the 2017 calendar tax year, the...

C Corporation has an S corporation election in effect. During the 2017 calendar tax year, the corporation had ordinary taxable income of $200,000, and on January 15, 2017, the corporation paid dividends to shareholders in the amount of $120,000. How much taxable income, in total, must the shareholders of the corporation report on their 2017 tax returns? $120,000 dividend income is taxable income. Should total include $200k ordinary income?

Last year Drone Corporation was formed on January 1st. An S election was filed by March...

Last year Drone Corporation was formed on January 1st. An S election was filed by March 15th of the same year. When the S election was filed it was missing a consent from one of the shareholders. The missing consent was filed on August 5th. Which of he following statements is correct? A- The S election is valid for last year, if the shareholder was out of the country until August 1st. B- The S election will be vaild beginning...

Discuss how beta of a corporation is assessed by analysts. Discuss how leverage can influence beta...

Discuss how beta of a corporation is assessed by analysts. Discuss how leverage can influence beta of corporation to yield leveraged beta. Provide a fictitious example for clarity. Use Yahoo finance or any credible source to find rate of return of a security in the past 20 years, and use this data to estimate the beta of the corporation by the two different methods. How does your estimated value compares to the value provided by the source? Make sure to...

Provide two examples of errors that can be made in accounting transactions. In addition, discuss how...

Provide two examples of errors that can be made in accounting transactions. In addition, discuss how these errors are "fixed."

Question