For its year ended December 31, 2016, Cupressa Corporation, an S corporation, had net income of $216,000 which included $180,000 of ordinary income from operations and a $36,000 net long-term capital gain. During 2016, a total of $90,000 was distributed to the corporation's nine equal shareholders, all of whom are on a calendar-year tax basis. For 2016, each shareholder should report:

Question

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Each shareholder should report $20,000 of ordinary income, which equals the total ordinary income of $180,000 divided by nine. In addition, each shareholder should report a pro rata share of the net long-term capital gain of $36,000. This is calculated by multiplying the net long-term capital gain by the percentage of ownership of each shareholder, which is equal for all shareholders in this case. Therefore, each shareholder should report $4,000 of net long-term capital gain ($36,000 divided by nine). Therefore, the correct answer is C.

For Its Year Ended December 31, 2016, Cupressa Corporation, an S