Yates Corporation elects S status,effective for calendar year 2015.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1,2015.The asset is sold at the end of 2015 for $130,800.What amount must Mark Farris,a 60% owner and subject to a 15% income tax rate,pay,if any?

Question

Quizplus · Accepted Answer

Mark Farris's share of the gain is 60% of the total gain. The gain is $130,800 - $50,200 = $80,600. Mark's share is 60% of $80,600, which is $48,360. The tax on this at 15% is $48,360 * 0.15 = $7,254. However, the correct choice is $5,358, which suggests a calculation error or different tax treatment.

Yates Corporation Elects S Status,effective for Calendar Year 2015