Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

McLin, Inc. is a calendar year S corporation. Its accumulated adjustments account (AAA) balance is zero. McLin holds $90,000 of American Electric Power (AEP). Tobias,

McLin, Inc. is a calendar year S corporation. Its accumulated adjustments account (AAA) balance is zero.

McLin holds $90,000 of American Electric Power (AEP). Tobias, the sole shareholder, has an adjusted basis of $80,000 in his stock. Determine the tax aspect if a $90,000 salary is paid to Tobias.

Same as part (a), except that McLin pays Tobias a $90,000 dividend from AEP.

If the beginning balance in Strauder, Inc.'s other adjustments account (OAA) is $5,700 and the following transactions occur, what is Strauder's ending OAA balance?

Depreciation recapture income

$22,700

Payroll tax penalty

(4,200)

Tax-exempt interest income

4,995

Nontaxable life insurance proceeds

50,000

Life insurance premiums paid (nondeductible)

(3,333)

Emeline, Inc., of Auburn, Alabama, is an accrual basis S corporation with three equal shareholders. The three cash basis shareholders have the following stock basis at the beginning of the year: Andre, $12,000; Crum, $22,000; and Barbara, $31,000. Emeline reports the following income and expense items.

Operating loss

($30,000)

Short-term capital gain

37,500

Long-term capital loss

(6,000)

Nondeductible fees and penalties

(3,000)

Emeline distributes $6,000 of cash to each of the shareholders during the tax year. Calculate each of the shareholders' stock bases at the end of the year.

Ruby is the owner of all of the shares of an S corporation. Ruby is considering receiving a salary of $80,000 from the business. She will pay 7.65% Federal Insurance Contributions Act (FICA) taxes on the salary, and the S corporation will pay the same amount of FICA tax. If Ruby reduces her salary to $40,000 and takes an additional $40,000 as a distribution, how much total tax could be saved?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information Systems

Authors: Pat Wheeler, Ulric J Gelinas, Richard B Dull

9th Edition

0538469315, 9780538469319

More Books

Students also viewed these Accounting questions

Question

Personal role: This consists of service to family and friends.

Answered: 1 week ago

Question

The role of life: It consists of your own service to yourself.

Answered: 1 week ago