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Keith, Inc., becomes an S corporation on January 1, 20X1. Sally, the sole shareholder, has a stock basis of $20,000 at January 1, 20X1, an
Keith, Inc., becomes an S corporation on January 1, 20X1. Sally, the sole shareholder, has a stock basis of $20,000 at January 1, 20X1, an accumulated adjustments account (AAA) balance of $0, and an earnings and profits account in the amount of $6,000. For the 20X1 taxable year, Keith, Inc., has the following:
Taxable income | $ | 30,000 |
Tax-exempt income | $ | 4,000 |
Capital gain | $ | 5,000 |
Expenses applicable to tax-exempt income | $ | 1,000 |
Charitable contributions | $ | 400 |
Disallowed 50% of meal expenses | $ | 800 |
Cash distributions to Sally | $ | 18,000 |
What is the AAA of Keith, Inc., at December 31, 20X1?
A. | $15,800 | ||
B. | $22,300 | ||
C. | $25,000 | ||
D. | $34,000 |
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