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Sanjaya Corporation is an S corporation with net losses from operations for several years. Simon is the 100-percent owner of Sanjaya and has ($35,000) of

Sanjaya Corporation is an S corporation with net losses from operations for several years. Simon is the 100-percent owner of Sanjaya and has ($35,000) of suspended losses on his Form 1040 from Sanjaya's prior year losses in excess of his basis in the stock. On January 1, current year, Sanjaya acquires 100 percent of Paula Corporation, a very profitable S corporation, and makes a QSUB election for Paula effective on the date of acquisition. If Simon receives a Schedule K-1 this year showing an operating net profit of $20,000 entirely attributable to the profitable operations of Paula, how much would Simon have to report in net taxable income from his S corporation this year? 


Simon will report $0 net taxable income this year. 


Simon will report $20,000 taxable income this year. 


Simon will report ($15,000) net loss this year. 


Simon will report ($35,000) net loss this year

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