If an S corporation's beginning balance in OAA is zero and the following transactions occur, what is the ending OAA balance? $\begin{array}{lr}
\text { Depreciation recapture income } & \$ 21,000 \
\text { Payroll tax penalty } & 4,200 \
\text { Tax -ex empt interest income } & 5,300 \
\text { Nontax able life insurance proceeds } & 5,100 \
\text { Life insurance premiums paid (nondeductible) } & 2,800
\end{array}$
A) $1,300
B) $7,600
C) $23,300
D) $27,500
E) None of these

Question

Quizplus · Accepted Answer

The ending OAA balance is calculated by adding tax-exempt interest income ($5,300) and nontaxable life insurance proceeds ($5,100) and subtracting nondeductible life insurance premiums paid ($2,800), resulting in $7,600. Depreciation recapture income and payroll tax penalty do not affect the OAA.

If an S Corporation's Beginning Balance in OAA Is Zero