ListCo reports the following income for the current tax year. Operations ............. $92,000 Tax-exempt interest income ......

Question:

ListCo reports the following income for the current tax year.

Operations ............. $92,000

Tax-exempt interest income ...... 19,000

Long-term capital gain ......... 60,000

ListCo holds earnings and profits (AAA for an S corporation) of $900,000 at the beginning of the year. Then ListCo distributes $200,000 in total to the owners.

a. Calculate the taxable income if ListCo is

(1) A C corporation

(2) An S corporation.
b. Determine the effect of the distribution on the shareholders if ListCo is

(1) A C corporation

(2) An S corporation.

Corporation
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