Hakeem, one of your firm’s clients, is a shareholder in Cedar Corporation. Cedar Corporation has an S corporation election in effect. During the 2020 calendar tax year, the corporation had an ordinary taxable income of $200,000, and on January 15, 2020, the corporation paid dividends to shareholders in the amount of $120,000. Hakeem has asked how much of that he needs to report on his income taxes. Your supervisor has asked you to follow up with Hakeem to get the information needed to make this determination. Write a letter to Hakeem explaining how his taxable income would be calculated and asking for the information that is still required.

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Keep in mind your income is an element of what determines what quantity you owe in federal and state income taxes As you prepare your income tax return it helps to know how the law views your income a... View the full answer