1. Upton, Inc. is currently an S corporation. The election was effective on January 1, 2018 and signed by its sole (unmarried at the time) shareholder, Justin. At the date of the S election, Upton had accumulated E&P of $900,000. During 2018, Upton incurred a loss for tax purposes of $40,000 and made net taxable income in 2019 of $250,000. Justins outside basis at the beginning of 2018 was $45,000. On December 31, 2019, Upton makes a distribution of property to Justin. The inside basis of the property was $150,000 and the fair market value was $1,150,000. Upton also distributed cash to Justin on the same day of $100,000. How much taxable income (regardless of type) will Justin have to recognize as a result of the distributions?

a. $0

b. $1,040,000

c. $40,000

d. $900,000

2.

Foreman Corporation has recently purchased all of the stock of Dumbass, Inc. in April 2018. Dumbass only does business in Nevada. Foreman decides to make a section 338 election on its purchase. Foreman paid $600,000 in cash for Dumbass, Inc. At the date of the purchase, Dumbass had rental payments due of $40,000, accounts payable of $28,000, and other debts of $12,000. The tax basis of all of Dumbasss assets was $95,000. What will be the sales price of old Dumbasss assets and the new basis in the assets to new Dumbass (rounded to nearest 1,000)? Use only the federal corporate tax rate.

Group of answer choices

a. $740,000 and $740,000

b. $585,000 and $680,000

c. $740,000 and $680,000

d. $836,000 and $836,000