Amber has a 20% ownership interest in an entity for which she initially contributed $250,000. She is
Question:
Amber has a 20% ownership interest in an entity for which she initially contributed $250,000. She is one of the original owners of the business. During the life of the business the following have occurred:
1. Cumulative losses of $600,000 during the last three years (her share would be $120,000)
2. Profits of $280,000 in the current year (her share would be $56,000)
3. The entity borrowed $150,000 of recourse debt
4. Distributions to owners of $150,000 (her share would be $30,000) in the current year
Determine the tax consequences if the entity is a partnership, a S corporation, and a regular Corporation respectively:
a. How much loss can she deduct over the three years?
b How much income will be taxable to her in the current year?
c What is the ending balance of her stockholder interest (show computations)?
Expert Answer:
