1. For the current tax year, S corporation BVX Inc. has $300,000 gross receipts from business, $15,000...

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1. For the current tax year, S corporation BVX Inc. has $300,000 gross receipts from business, $15,000 net rental real estate loss, $4,000 portfolio interest income, $10,000 depreciation on equipment, and $2,000 Section 179 deduction on equipment purchased. BVX paid $40,000 in salaries and wages including compensation to officers and had $110,000 in other business deductions. How much ordinary business income is reported on the S corporation return for BVX Inc.?

2. XRC Inc., a former C corporation, elected S corporation status two years ago. The company is on a calendar year fiscal year. On the first day of the S election, XRC owned a special piece of equipment with a $10,000 FMV and basis of $7,000. During the current tax year, XRC sold this equipment for $11,000. Assume there are no other capital gains or losses for XRC during the current tax year. This is a two-part question.

Question 1: What amount of built-in gains tax will XRC Inc. pay due to this sale?

Question 2: What total amount of capital gains will XRC pass through to its shareholders due to this sale?

3. George is the owner of S corporation SRC Inc., which he formed this year with an investment of $50,000. Net business income (ordinary income) for SRC for the first tax year is $20,000. SRC Inc. paid $5,000 in nondeductible meal and entertainment expenses, and George did not take a distribution. What is George's adjusted basis in SRC Inc. stock at the end of the first tax year?

4. NDP Inc., a C corporation with $60,000 in accumulated earnings and profits (AE&P) at the end of last year, elected to become an S corporation at the beginning of the current tax year. At the end of the current tax year, NDP has $40,000 in the accumulated adjustments account (AAA), $15,000 in the other adjustments account (OAA), and $60,000 in the AE&P account before any distributions of $15,000 to each of its 50% shareholders. No election has been made relating to the source of distributions. This is a two-part question.

Question 1: What is the remaining balance in AE&P for NDP Inc. after making the cash distributions to its shareholders?

Question 2: What amount of these distributions is taxable to the shareholders?