Beige, Inc., a personal service corporation, has the following types of income and losses. Active income $219,000 Portfolio income 37,000 Passive activity losses 240,000

a. Calculate Beige’s taxable income.

b. Assume that instead of being a personal service corporation, Beige is a closely held corporation.

Calculate Beige’s taxable income.

Amber holds a 20% interest in a business to which she contributed $100,000 as part of the initial ownership group. During the life of the business, the following have occurred. l $200,000 cumulative losses, first three tax years. l $150,000 operating profit in the fourth tax year. l $75,000 distribution to owners at the end of the third tax year. l $60,000 payment to redeem 25% of Amber’s ownership interest at the end of the fourth year. No other ownership redemptions have occurred.

Determine the tax consequences to Amber if the entity is organized as:

a. A partnership.

b. An S corporation.

c. A C corporation.


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