Monie, an individual taxpayer, owns 50% of Monie & Co, an S Corporation. At the beginning of 20X4, Monie's basis in Monie & Co stock was $55,000. During 20X4, Monie & Co realized an ordinary loss in the amount of $45,000 and a short-term capital loss of $15,000. Monie & Co made total distributions of $70,000 to its shareholders during this taxable year.
What amount of the $70,000 distribution is taxable to Monie?
Taxable income is the actual amount on which the tax liability is calculated from all the sources after allowing the deductions as per the sections of the income tax act.
Answer and Explanation:
Calculation of at what amount of the $70,000 distribution is taxable to Monie
|Initial stock basis||$55,000|
|Share of Monie in ordinary loss and short term capital loss ($45,000 + $15,000) * 50%||$30,000|
|Stock basis before distribution of dividend||25,000|
|less Monie distribution of dividend (70,000 * 50%)||35,000|
|Taxable amount taxed under capital gain||$10,000|
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from Accounting 202: Intermediate Accounting IIChapter 8 / Lesson 2