Jake is the sole shareholder of an S corporation that earned $50,000 in 2012. The corporation was short on cash and therefore distributed only $15,000 to Jake in 2012. Jake is required to recognize $15,000 of income from the S corporation in 2012.

Question

Quizplus · Accepted Answer

Jake must recognize the entire $50,000 of income from the S corporation in 2012, regardless of the amount distributed, because S corporation income is passed through to shareholders and taxed on their personal tax returns.

Jake Is the Sole Shareholder of an S Corporation That