Question 66. [LO 5] Maple Corp., a calendar-year corporation, was formed t

66. [LO 5] Maple Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Brady, who immediately elected S corporation status. On December 31 of the current year, Maple distributed $30,000 cash to Brady. What is the amount and character of gain Brady must recognize on the distribution in each of the following alternative scenarios?

1. 1. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $35,000.

1. 1. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $8,000.

c. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $0.

67. [LO 5] Oak Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Glover, and has always operated as a C corporation. However, at the beginning of this year, Glover made a qualifying S election for Oak Corp., effective January 1. Oak Corp. did not have any C corporation earnings and profits on that date. On June 1, Oak Corp. distributed $15,000 to Glover. What is the amount and character of gain Glover must recognize on the distribution, and what is his basis in his Oak Corp. stock in each of the following alternate scenarios?

a. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $35,000.

b. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $8,000.

c. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $0.

68. [LO 5] Janna has a tax basis of $15,000 in her Mimikaki stock (Mimikaki has been an S corporation since inception). In 2014, Janna was allocated $20,000 of ordinary income from Mimikaki. What is the amount and character of gain she recognizes from end of the year distributions in each of the following alternative scenarios, and what is her stock basis following each distribution?

a. Mimikaki distributes $10,000 to Janna.

b. Mimikaki distributes $20,000 to Janna.

c. Mimikaki distributes $30,000 to Janna.

d. Mimikaki distributes $40,000 to Janna.

69. [LO 5] Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone’s earnings and profits at the end of year 1 were $10,000. Marcus is Johnstone’s sole shareholder. What is Johnstone’s accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios?

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