Rose Corporation is an S corporation with one shareholder, Eddie. Eddie's stock basis at the beginning of the current year is $8,000. Rose Corporation reports the following results for the current year:

• Ordinary loss: $6,000
• Dividend income: $2,000

In addition, at the beginning of the current year, the S corporation has a $5,000 AAA balance and a $4,000 AEP balance. Rose Corporation distributes $7,500 cash to Eddie. Provide each of the following amounts.

1. Ending balance in AAA
2. Ending balance in AEP
3. Eddie's ending stock basis
4. The amount of the distribution that is taxable
5. The amount of the loss that is deductible

Now assume the same facts as above except that Rose Corporation elects the AAA bypass election.

1. Ending balance in AAA
2. Ending balance in AEP
3. Eddie's ending stock basis
4. The amount of the distribution that is taxable
5. The amount of the loss that is deductible

Answer rating: 100% (QA)

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