Rajib is the sole shareholder of Cardinal Corporation, a calendar year S corporation. In the current year, Cardinal generated a net profit of $350,000 ($520,000 gross income - $170,000 operating expenses) and distributed $80,000 to Rajib. Rajib must report the Cardinal Corporation profit of $350,000 on his Federal income tax return.

Question

Quizplus · Accepted Answer

As the sole shareholder of an S corporation, Rajib must report his share of the corporation's income, deductions, credits, etc., on his personal tax return, regardless of whether the income was distributed. Since he is the sole shareholder, he reports 100% of the corporation's net profit, which is $350,000 in this case.

Rajib Is the Sole Shareholder of Cardinal Corporation, a Calendar