Jake is the sole shareholder of an S corporation that earned $50,000 in 2010.The corporation was short on cash and therefore distributed only $15,000 to Jake in 2010.Jake is required to recognize $50,000 of income from the S corporation in 2010.

Question

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As the sole shareholder of an S corporation, Jake is required to report his share of the corporation's income on his personal tax return, regardless of whether he actually received it in the form of a distribution. Therefore, Jake must recognize the full $50,000 of income from the S corporation in 2010, even though he only received $15,000 in cash.

Jake Is the Sole Shareholder of an S Corporation That