ABC LLC was formed in 2017. Since 2018, ABC has incurred losses of 200,000 per year....

Transcribed Image Text:

ABC LLC was formed in 2017. Since 2018, ABC has incurred losses of 200,000 per year. The initial capital contributions of the three members of LLC were $250,000 in cash. No other capital contributions have been made by the three shareholders. In 2021, ABC finally earns a profit of $100,000. Please answer the following questions: 1. Assuming that ABC is taxed as an s-corporation, what is each shareholder's basis in ABC as of January 1, 2022? 2. Assuming that ABC is taxed as an c-corporation, what is each shareholder's basis in ABC as of January 1, 2022? 3. Assuming that ABC is taxed as an s-corporation, what flow-through-losses, if any, could the shareholders take for 2018 to 2020? 4. Assuming that ABC is taxed as an c-corporation, and the $100,000 was earned ratably over the year, a distribution is made to all three shareholders on July 1. How is the distribution taxed and why? 5. With reference to question 4 above, following the distribution, what would the shareholder's basis be in the company? ABC LLC was formed in 2017. Since 2018, ABC has incurred losses of 200,000 per year. The initial capital contributions of the three members of LLC were $250,000 in cash. No other capital contributions have been made by the three shareholders. In 2021, ABC finally earns a profit of $100,000. Please answer the following questions: 1. Assuming that ABC is taxed as an s-corporation, what is each shareholder's basis in ABC as of January 1, 2022? 2. Assuming that ABC is taxed as an c-corporation, what is each shareholder's basis in ABC as of January 1, 2022? 3. Assuming that ABC is taxed as an s-corporation, what flow-through-losses, if any, could the shareholders take for 2018 to 2020? 4. Assuming that ABC is taxed as an c-corporation, and the $100,000 was earned ratably over the year, a distribution is made to all three shareholders on July 1. How is the distribution taxed and why? 5. With reference to question 4 above, following the distribution, what would the shareholder's basis be in the company?

Answer rating: 100% (QA)

Part 1 The basis per shareholder in case ABC is taxed as S Corp83333 Part 2 The basis per shareholder in case ABC is taxed as C Corp250000 Part 3 Flow... View the full answer