1. Sentilles, Inc., a calendar year S corporation, incurred the following items this year.
a. Calculate Sentilles's nonseparately computed income.
b. How much ordinary income or loss is reported by Brittany Nelson, a 25% shareholder?
§ 1231 gain $ 11,000
Tax-exempt interest income 7,000
Net sales 140,020
Depreciation recapture income 14,000
Long-term capital gain 20,000
Cost of goods sold (42,000)
Administrative expenses (15,000)
Depreciation expenses (13,000)
Charitable contribution (10,000)
Distributions to shareholders (34,000)
2. Whip, Inc., is a calendar-year S corporation. Whip's book income this year totals $90,000. Whip is owned equally by three shareholders. From supplemental data, you obtain the following information about items that are included in book income.
a. Compute Whip's Subchapter S income or loss for 2011.
b. How much ordinary income or loss is reported by Nicole, one of Whip's shareholders?
c. How much dividend income is reported on Nicole's Schedule K-1?
Selling expenses ($21,200)
Tax-exempt interest 2,200
Dividends received 9,000
§ 1231 gain 6,000
Depreciation recapture income 12,000
Recovery of bad debts 4,000
Long-term capital loss (6,000)
Salary to owners (each) (10,000)
Cost of goods sold (95,000)
Distributions to shareholders (6,300)
3. At the beginning of the year, Ann and Becky own equally all of the stock of Whitman, Inc., an S corporation. Whitman generates a $120,000 loss for the year (not a leap year). On the 189th day of the year, Ann sells her half of the Whitman stock to her son, Scott. How much of the $120,000 loss, if any, belongs to Scott?
4. In Problem 44, how much of the Whitman loss belongs to Ann and Becky, assuming Becky's stock basis is $41,300?
5. Renae Crochet sold 1,000 shares of her stock in Blue, Inc., an S corporation. She sold the stock for $12,750, after she had owned it for four years. Renae had paid $97,000 for the stock, which was issued under § 1244. Renae is single and is the original owner of the 1,000 shares. Determine the appropriate tax treatment of any gain or loss on the stock sale.
Non-separately computed income, ordinary income and stock basis are examined.