Yates Corporation elects S status, effective for calendar year 2012.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1, 2012.The asset is sold at the end of 2012 for $130,800.What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

Question

Quizplus · Accepted Answer

The gain on the sale is $80,600 ($130,800 - $50,200). Mark Farris's share is 60%, which is $48,360. The tax is 15% of $48,360, which equals $7,254. However, the correct choice is $5,358, which suggests a calculation error or different tax treatment.

Yates Corporation Elects S Status, Effective for Calendar Year 2012