ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2014, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2014 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | }
\hline { \text { Period } } & { \text { Income } } \
\hline \text { January 1 through April 30 (120 days) } & \$ 200,000 \
\hline \text { May 1 through December 31 (245 days) } & 530,000 \
\hline \text { January 1 through December 31 } & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

Question

ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2014, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2014 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | } 
\hline { \text { Period } } &  { \text { Income } } \
\hline \text { January 1 through April 30 (120 days) } & \$ 200,000 \
\hline \text { May 1 through December 31 (245 days) } & 530,000 \
\hline \text { January 1 through December 31 } & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

Quizplus · Accepted Answer

The Answer of ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2014, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2014 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | } 
\hline { \text { Period } } &  { \text { Income } } \
\hline \text { January 1 through April 30 (120 days) } & \$ 200,000 \
\hline \text { May 1 through December 31 (245 days) } & 530,000 \
\hline \text { January 1 through December 31 } & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

ABC Was Formed as a Calendar-Year S Corporation with Alan