Prepare a tax memo

Chris Valletta, the sole shareholder of Taylor, Inc., elects to terminate the S election, effective at the end of 2010. As of the end of 2010, Taylor, Inc., has AAA of $80,000 and OAA of $15,000. Then Chris received a cash distribution of $100,000 on January 15, 2011.

If his stock basis was $220,000 before the distribution, calculate his taxable amount and his ending stock basis.

A calendar year S corporation has an ordinary loss of $80,000 and a capital loss of COMMUNICATIONS $20,000. Ms. Muhammad owns 30% of the corporate stock and has a $24,000 basis in her stock. Determine the amounts of the ordinary loss and capital loss, if any, that flow through to Ms. Muhammad.

Prepare a tax memo for the files, summarizing your position.

On January 1, Bobby and Alicia own equally all of the stock of an electing S corporation called Prairie Dirt Delight. The company has a $60,000 loss for the year (not a leap year). On the 219th day of the year, Bobby sells his half of the stock to his son, Bubba.

How much of the $60,000 loss, if any, is allocated to Bubba?


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