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Monie, an individual taxpayer, owns 50% of Monie & Co, an S Corporation. At the beginning of...

Question:

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:

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

Particulars Amount$
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

Learn more about this topic:

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How to Calculate Corporate Taxable Financial Income

from Accounting 202: Intermediate Accounting II

Chapter 8 / Lesson 2
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