Jake is the sole shareholder of an S corporation that earned $60,000 in 2017. The corporation was short on cash and therefore distributed only $15,000 to Jake in 2017. Jake is required to recognize $60,000 of income from the S corporation in 2017.

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As the sole shareholder of an S corporation, Jake is required to recognize all of the corporation's income, regardless of whether or not it was actually distributed to him. Therefore, Jake must recognize $60,000 of income from the S corporation in 2017, even though he only received $15,000 in distributions.

Jake Is the Sole Shareholder of an S Corporation That