25 May Question 1. During 2014, Oxen Corporation incurs the following transactions.
Question
1. During 2014, Oxen Corporation incurs the following transactions.
| Net income from operations | $100,000 |
| Interest income from savings account | 3,000 |
| Long-term capital gain from sale of securities | 10,000 |
| Short-term capital loss from sale of securities | 4,000 |
Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder, Megan. As a result, Megan must recognize:
a. Ordinary income of $103,000.
b. Ordinary income of $103,000 and long-term capital gain of $5,000.
c. Ordinary income of $103,000, long-term capital gain of $10,000, and $4,000 short-term capital loss.
d. Ordinary income of $109,000.
2. On January 1, Bobby and Alice own equally all of the stock of an electing S corporation called Prairie Dirt Delight. The dirt company has a $60,000 loss for a non-leap year. On the 200th day of the year, Bobby sells his one-half of the stock to his son, Saul. How much of the $60,000 loss, if any, is allocated to Bobby?
a. $0.
b. $13,562.
c. $16,438.
d. $32,877.
3. A calendar year C corporation reports a $41,000 NOL in 2013, but it elects S status for 2014 and generates an NOL of $30,000 in that year. At all times during 2014, the stock of the corporation was owned by the same 10 shareholders, each of whom owned 10% of the stock. Kris, one of the 10 shareholders, holds an S stock basis of
$2,300 at the beginning of 2014. How much of the 2014 loss, if any, is deductible by Kris?
a. $0.
b. $2,300.
c. $3,000.
d. $7,100.
4. An S corporation reports a recognized built-in gain of $110,000 and taxable income of $98,000. The company carries an $8,000 NOL carryforward from a C corporation year, and a $7,000 business credit carryforward from a C corporation year. The built-in gains tax liability is:
a. $31,500.
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