McLin, Inc. is a calendar year S corporation. Its accumulated adjustments account (AAA) balance is zero. McLin holds $90,000 of American Electric Power (AEP). Tobias, the sole shareholder, has an adjusted basis of $80,000 in his stock. Determine the tax aspect if a $90,000 salary is paid to Tobias.
Same as part (a), except that McLin pays Tobias a $90,000 dividend from AEP.
If the beginning balance in Strauder, Inc.'s other adjustments account (OAA) is $5,700 and the following transactions occur, what is Strauder's ending OAA balance?
Depreciation recapture income
$22,700
Payroll tax penalty
(4,200)
Tax-exempt interest income
4,995
Nontaxable life insurance proceeds
50,000
Life insurance premiums paid (nondeductible)
(3,333)
Emeline, Inc., of Auburn, Alabama, is an accrual basis S corporation with three equal shareholders. The three cash basis shareholders have the following stock basis at the beginning of the year: Andre, $12,000; Crum, $22,000; and Barbara, $31,000. Emeline reports the following income and expense items.
Operating loss
($30,000)
Short-term capital gain
37,500
Long-term capital loss
(6,000)
Nondeductible fees and penalties
(3,000)
Emeline distributes $6,000 of cash to each of the shareholders during the tax year. Calculate each of the shareholders' stock bases at the end of the year.
Ruby is the owner of all of the shares of an S corporation. Ruby is considering receiving a salary of $80,000 from the business. She will pay 7.65% Federal Insurance Contributions Act (FICA) taxes on the salary, and the S corporation will pay the same amount of FICA tax. If Ruby reduces her salary to $40,000 and takes an additional $40,000 as a distribution, how much total tax could be saved?