Barry Potter and Winnie Weasley are considering making an S election on March 1, 2019, for their C corporation, Omniocular. However, first they want to consider the implications of the following information:Winnie is a U. S. citizen and resident. Barry is a citizen of the United Kingdom, but a resident of the United States. Barry and Winnie each own 50 percent of the voting power in Omniocular. However, Barry’s stock provides him with a claim on 60 percent of the Omniocular assets in liquidation. Omniocular was formed under Arizona state law, but it plans on eventually conducting some business in Mexico. For the remainder of the problem, assume Omniocular made a valid S election effective January 1, 2019. Barry and Winnie each own 50 percent of the voting power and have equal claim on Omniocular’s assets in liquidation. In addition, consider the following information:Omniocular reports on a calendar tax year. Omniocular’s earnings and profits as of December 31, 2018, were $55,000.Omniocular’s 2018 taxable income was $15,000.Omniocular’s assets at the end of 2018 are as follows:Omniocular AssetsDecember 31, 2018 Asset Adjusted Basis FMVCash $ 50,000 $ 50,000Accounts receivable 20,000 20,000Investments in stocks and bonds 700,000 700,000Investment in land 90,000 100,000Inventory (LIFO) 80,000 * 125,000Equipment 40,000 35,000Totals $ 980,000 $ 1,030,000*$110,000 under FIFO accounting. On March 31, 2019, Omniocular sold the land for $42,000.In 2019, Omniocular sold all the inventory it had on hand at the beginning of the year. This was the only inventory it sold during the year. Other Income/Expense Items for 2019Sales revenue $ 155,000 Salary to owners (50,000 )Employee wages (10,000 )Depreciation expense (5,000 )Miscellaneous expenses (1,000 )Interest income 40,000 Qualified dividend income 65,000 Assume that if Omniocular were a C corporation for 2019, its taxable income would have been $88,500.Built-in gains tax: 3,150Excess net passive income tax: $8,400 = (40,000 *21%)e. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2019. What is his stock basis on December 31, 2019?For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular’s S election, effective August 1, 2020.In 2020, Omniocular reported the following income/expense items:January 1—July 31, 2020 (213 days) August 1—December 31, 2020 (153 days) January 1—December 31, 2020Sales revenue $ 80,000 $ 185,000 $ 265,000 Cost of goods sold (40,000 ) (20,000 ) (60,000 )Salaries to Barry and Winnie (60,000 ) (40,000 ) (100,000 )Depreciation expense (7,000 ) (2,000 ) (9,000 )Miscellaneous expenses (4,000 ) (3,000 ) (7,000 )Interest income 6,000 5,250 11,250 Overall net income (loss)