Taxation

Lejeune, Inc., an S corporation in Boone, North Carolina, reports operating revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. Lejeune’s accumulated E & P amounts to $2 million.

Calculate any penalty tax payable by Lejeune or its shareholders.

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Sonny, Inc., an S corporation in Polly Beach, South Carolina, has a recognized builtin gain of $95,000 and taxable income of $80,000. It holds a $7,000 NOL carry forward and a $9,000 business credit carry forward from a C corporation year. There are no earnings and profits from C corporation years.

Calculate Sonny’s built-in gains tax liability.

Cardinal, Inc., an S corporation, reports a $102,000 operating loss during the year (not a leap year). At the beginning of the year, Barbara and Sally each own one-half of the stock. On the 102nd day of the year, Barbara sells her half of the stock to Jacob.

How much of Cardinal’s ordinary loss flows through to Barbara?

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