QUESTION 29 Corporation S elects S Corporation status effective January 1 of the tax year specified for the exam J is the sole shareholder having a basis of $450,000 in his stock S has accumulated earnings in profits of $600,000 During the same year, S has net earnings of $150,000 S distributed $1,350,000 to J during the tax year a The distribution is tax free b $600,000 of the distribution is tax free The remaining $650,000 is taxable c $600,000 of the distribution is tax free, $600,000 is a dividend, and the remaining $150,000 is treated as income from the sale or exchange of stock d None of the above QUESTION 30 Corporation S is an S Corporation which elects S status effective January 1 of the tax year specified for the exam Sole shareholder J has a basis of $400,000 in his stock At the same time, S has $200,000 in accumulated earnings and profits For the same tax year, S has the following items of income and expense Gross Business Income $250,000 Dividend Income 150,000 Business Expenses 100,000 Expenses Related to Dividends 50,000 a J has non separately stated income of $150,000 and dividend income of $100,000 b J has non separately stated income of $150,000 and dividend income of $88,333 c Neither of the above

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QUESTION 29 Corporation S elects S Corporation status effective January 1 of the tax year specified for the exam. J is the sole shareholder having

QUESTION 29

Corporation S elects S Corporation status effective January 1 of the tax year specified for the exam. J is the sole shareholder having a basis of $450,000 in his stock. S has accumulated earnings in profits of $600,000. During the same year, S has net earnings of $150,000. S distributed $1,350,000 to J during the tax year.

	a.	The distribution is tax free.
	b.	$600,000 of the distribution is tax free. The remaining $650,000 is taxable.
	c.	$600,000 of the distribution is tax free, $600,000 is a dividend, and the remaining $150,000 is treated as income from the sale or exchange of stock.
	d.	None of the above.

QUESTION 30

Corporation S is an S Corporation which elects S status effective January 1 of the tax year specified for the exam. Sole shareholder J has a basis of $400,000 in his stock. At the same time, S has $200,000 in accumulated earnings and profits. For the same tax year, S has the following items of income and expense:

Gross Business Income $250,000

Dividend Income 150,000

Business Expenses 100,000

Expenses Related to Dividends 50,000

	a.	J has non-separately stated income of $150,000 and dividend income of $100,000.
	b.	J has non-separately stated income of $150,000 and dividend income of $88,333.
	c.	Neither of the above.