13 Pan Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Conner, who immediately elected S corporation status. On December 31 of the current year, Pan distributed $30,000 cash to Conner. At the time of the distribution, Conner's basis in his Pan Corp. stock was $35,000. What is the amount and character of gain Conner must recognize on the distribution? a. $30,000 Long Term Capital Gain O b. $35,000 Long Term Capital Gain c. $30,000 Ordinary Income d. Zero Gain or Loss QUESTION 14 Capital Corporation was formed as a C corporation on January 1, Year 1, and it elected S corporation status on January 1, Year 3. At the time of the election, Capital had accumulated C corporation earnings and profits, which have not been distributed. Capital has had the same 25 shareholders throughout its existence. In Year 6, Capital's S corporation election will terminate if it: a. Has passive investment income exceeding 90 percent of gross receipts in each of the three consecutive years ending December 31, Year 5. O b. Adds a decedent's estate as a shareholder to the existing shareholders. c. Takes a charitable contribution deduction. d. Increases the number of shareholders to 100. QUESTION 15 Sales taxes are collected from customers and remitted to the state by seller. True False