ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2016, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2016 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | }
\hline \text { Period } & \text { Income } \
\hline \text { January 1 through April } 30 \text { (120 days) } & \$ 200,000 \
\hline \text { May 1 through December } 31 ( 245 \text { days) } & \underline { 530,000 } \
\hline \text { January 1 through December } 31 & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

Question

ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2016, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2016 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | } 
\hline \text { Period } & \text { Income } \
\hline \text { January 1 through April } 30 \text { (120 days) } & \$ 200,000 \
\hline \text { May 1 through December } 31 ( 245 \text { days) } & \underline { 530,000 } \
\hline \text { January 1 through December } 31 & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

Quizplus · Accepted Answer

The Answer of ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2016, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2016 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | } 
\hline \text { Period } & \text { Income } \
\hline \text { January 1 through April } 30 \text { (120 days) } & \$ 200,000 \
\hline \text { May 1 through December } 31 ( 245 \text { days) } & \underline { 530,000 } \
\hline \text { January 1 through December } 31 & \$ 730,000 \
\hline
\end{array}$$ If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

ABC Was Formed as a Calendar-Year S Corporation with Alan