QUESTION 23 60,000 3,000 10,000 50,000 4,000 11,000 Lewis, Inc. is a calendar year S-Corporation with the following activity: Ordinary Income Interest income - taxable Tax exempt income Distributions to shareholders Interest expense for loan to buy tax-exempt securities Charitable contributions Here is a picture of the Schedule M-2 for Lewis, Inc. showing the beginning balances in each category. Schedule M-2 Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account see instructions) (a) Accumulated (b) Shareholders (c) Accumulated (dl ) Other adjustments adjustments account undistributed taxable earnings and profits account income previously taxed 1 Balance at beginning of tax year. 25000 2 Ordinary income from page 1, line 21 3 Other additions 4 Loss from page 1, line 21 Other reductions 6 Combine lines 1 through 5. Distributions. Balance at end of tax year. Subtract line 7 from line 6 Form 1120-S (2020) As shown, there were $50,000 distributions made to shareholders. Which of the following is correct? The taxable amount of the distribution is $50,000 and the reduction to shareholder's stock basis is $0. The taxable amount of the distribution is $50,000 and the reduction to shareholder's stock basis is $50,000. The taxable dividend amount is $0 and the reduction to shareholder's stock basis is $0. The taxable amount of the distribution is $0 and the reduction to shareholder's stock basis is $50,000. 6000 0 8000 5 7 8