Hazel is the sole shareholder of Maple Corp. In 2018 Maple operated as a C corporation and reported $15,000 of taxable income (and earnings and profits). In 2018, Maple elected S corporation status. During 2019 Maple reported $12,000 of ordinary business income and no separately stated items. It also distributed $25,000 to Hazel. What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2019 (after accounting for the distribution) if her basis at the beginning of the year was $5,000?

Question

Quizplus · Accepted Answer

The Answer of Hazel is the sole shareholder of Maple Corp. In 2018 Maple operated as a C corporation and reported $15,000 of taxable income (and earnings and profits). In 2018, Maple elected S corporation status. During 2019 Maple reported $12,000 of ordinary business income and no separately stated items. It also distributed $25,000 to Hazel. What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2019 (after accounting for the distribution) if her basis at the beginning of the year was $5,000?

Hazel Is the Sole Shareholder of Maple Corp