Yates Corporation elects S status,effective for calendar year 2010.Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1,2010.The asset is sold at the end of 2010 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 of the asset is $80,600 ($130,800 - $50,200). Mark Farris's share of the gain is 60%, which is $48,360. The tax on this gain at a 15% rate is $7,254. However, the correct choice is $5,358, which suggests a calculation error or a different tax treatment.

Yates Corporation Elects S Status,effective for Calendar Year 2010