19. If Corp. Z above is an S Corporation, business expenses increase to $1,160,000 and 45% of business losses for 2022 are allocated to passive shareholders:

Is Corp. Z permitted to retain cash method? _______________ (Yes/No)

Why? (Yes or No, 1 sentence & Code Section)

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Describe any elections available (Max 2 sentences)

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Give Regulation Section for c above _______________

Can Passive Activity losses offset shareholder wages? _______________

Give Code Section to Part e _______________ 28. Corp. Z has accumulated E&P of $100,000 and current year results as follows:

Shareholder Basis in Stock - $10,000

Income - $1,000,000

General Expenses - $300,000

Cost of Goods Sold - $600,000

Officer Salary - $300,000 ($200,000 reasonable)

Excessive Lease Payment to Shareholder - $50,000 (included in General Expenses) Interest from Corporate Loan to Shareholder - $10,000 below statutory benchmark

Current Loss is $__________

Total distribution amount is $__________

Total distribution from current E&P $__________

Dividend from accumulated E&P $__________

How is remainder of distribution taxed? Give Code Sections. _____________________ 29. X Corp. (a C corporation) distributes Whiteacre to shareholders all of whom have held their shares for several years. Cost $250,000 ; FMV $1,000,000. There are no current earnings for 2022. Accumulated E&P is 0.

Basis of stock is $50,000.

Is X Corp. taxed? __________

Compute tax. $___________

Give Code Section __________

In Question 29 above, what is the shareholder income show computations.

Are the shareholders taxed? __________

Give Code Sections with Subsections __________

Character and amount of Distribution - Show computations and all income classes.

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Maximum tax bracket to shareholder before any surtax.

Surtax amount if threshold is exceeded. ____________

If the FMV were $200,000 is there any gain or loss to Corp. X? (If yes give amount and indicate if gain/loss) _______________

Give code section to Part f above __________