Lemon Corporation incurs the following transactions. $$\begin{array} { l c }
\text { Net income from operations } & \$ 110,000 \
\text { Interest income from saving account } & 5,000 \
\text { Long-term capital gain from sale of securities } & 9,000 \
\text { Short-term capital loss from sale of securities } & 4,000
\end{array}$$ Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.

Question

Lemon Corporation incurs the following transactions. $$\begin{array} { l c } 
\text { Net income from operations } & \$ 110,000 \
\text { Interest income from saving account } & 5,000 \
\text { Long-term capital gain from sale of securities } & 9,000 \
\text { Short-term capital loss from sale of securities } & 4,000
\end{array}$$ Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.

Quizplus · Accepted Answer

S corporations pass through their income, deductions, losses, and credits to their shareholders for federal tax purposes. Patty must recognize the net income from operations ($110,000), interest income ($5,000), long-term capital gain ($9,000), and short-term capital loss ($4,000) on her personal tax return.

Lemon Corporation Incurs the Following Transactions Lemon Maintains a Valid S Election and Does Not Distribute