IMG_5646JPG - Photos 7. Investment interest expense IIEx ..... 8. Increase in pa
ID: 2535712 • Letter: I
Question
IMG_5646JPG - Photos 7. Investment interest expense IIEx ..... 8. Increase in partnership liabilities INCI 9 .Distributions to Hilda DIST... 10.Fines and penalties F&P........; 1.000 400 3,000 2.000 1,200 8. Esscorp an S Corporation does not have C corp E&P.; Sam, the sole shareholder has an adjusted basis in his shares of $10,000 at the beginning of the year. For the year the corporation has non separately stated income of $100,000 and tax exempt income of $15,000. It pays a dividend to Sam of $50,000. a) How does Sam treat the receipt of the $50,000 dividend? b) What is Sam's basis in the shares at the beginning of the next year? 9:49 PM A x 4/30/2018 Ha O . eExplanation / Answer
Solutions:
a) $50,000 dividend will be taxable income for Sam and has to be reported on line 9a of form 1040. Additionally, the SCorp will report this income on K-1 for Sam and should issue 1099-DIV to Sam and IRS.
b) Sam's basis at the beginning of next year would be $60,000.
10,000+100,000-50,000 = 60,000