Now instead assume the following: Memories elected S status, effective for the taxable year beginning July 1, 2018. HMI had wanted to keep its fiscal year, but it could not document significant seasonality. So the first S tax return will be for six months, reflecting the new calendar tax year. A C corporation return was filed for the fiscal year ending June 30, 2018. That return showed a zero taxable income for current year operations. The balance sheet for June 30, 2018 only differs from the June 30, 2017 statement as presented by $40,000 additional depreciation deductions claimed. HMI plans to sell the investment land in 2019 to raise cash, because Bob and Angie feel that the appreciation potential in the land will have flattened by then. They expect the property to be worth about $800,000 in 2019. I Angie and Bob anticipate that there will be net tax losses from operations of $200,000 during the six- month period ending December 31, 2018. Projected operating losses for calendar tax year 2019 total $60,000, without consideration of the land sale. Convey to HMI the tax effects of such a 2018 conversion to S status. Provide a restated HMI balance sheet as of June 30, 2018, and compute the passthrough to the shareholders for the 2019 HMI calendar year. PWC Case Studies in Taxation, @ 2018, PWC, LLP Page 2 of 4