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    Ordinary, long-term and short-term capital gain and loss

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    During 2002, Parrot Corporation incurs the following transactions.

    Net income from operations $154,000

    Long-term capital gain from sale of securities 66,000
    Short-term capital loss from sale of securities 46,000

    Parrot maintains a valid S election and does not distribute any dividends to its sole shareholder, Jamille. As a result, how much ordinary income, long-term capital gain, and short-term capital loss Jamille must recognize.

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    Solution Preview

    Income and loss amounts are passed out to the shareholders following the concept that an S election converts a regular, tax-paying corporation to a pass through entity with respect to the payment of income tax. That means all income statement items flow out to the shareholder regardless ...

    Solution Summary

    The solution discusses the tax treatment for each of the items in the problem for Parrot Corporation. Effects of being an "S" Corporation are discussed as well as the effects to the individual tax return.