Jake is the sole shareholder of an S corporation that earned $50,000 in 2011.The corporation was short on cash and therefore distributed only $15,000 to Jake in 2011.Jake is required to recognize $15,000 of income from the S corporation in 2011.

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In an S corporation, shareholders are taxed on their share of the corporation's income, regardless of the amount distributed. Jake must recognize the full $50,000 of income, not just the $15,000 distributed.

Jake Is the Sole Shareholder of an S Corporation That