Question: Graphite Corp. has been a calendar-year S corporation since its inception on January 2, 2006. On January 1, 2010, Smith and Tyler each owned 50%

Graphite Corp. has been a calendar-year S corporation since its inception on January 2, 2006. On January 1, 2010, Smith and Tyler each owned 50% of the Graphite stock, in which their respective bases were $12,000 and $9,000. For the year ended December 31, 2010, Graphite had $80,000 in ordinary business income and $6,000 in tax-exempt income.

Graphite made a $53,000 cash distribution to each shareholder on December 31, 2010. What total amount of income from Graphite is includible in Smith’s 2010 adjusted gross income?

a. $96,000

b. $93,000

c. $43,000

d. $40,000

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