immediately prior to the disposition or repayment.12 PROBLEMS 1. s Corporation is a calendar year taxpayer which elected S corporation status in its first year of operation. Ss common stock is owned by A (200 shares with a $12,000 basis) and B (100 shares with a $6,000 basis). During the current year, S will have the following income and expenses: Business income $92,000 Tax-exempt interest. $ 1.000 Salary expense $44,000 Depreciation $ 8,000 Property taxes $7,000 Supplies $ 4,000 Interest expense paid on a margin account maintained with S Corp.'s stockbroker $ 6,000 Gain from the sale of equipment held for two years $ 1245 gain $ 7.000 $ 1231 gain $ 12,000 STCG from the sale of AT&T stock $ 7,500 LTCG from the sale of Chrysler stock held for $ 15,000 two years LTCL from the sale of investment real estate $ 9,000 held for two years... $ 6,000 Bribe of government official $ 4,500 Recovery of a bad debt previously deducted. (a) How will s Corporation. A and B report these events? Compare $704(b)(2) and (c) (b) What is A's basis in his stock at the end of the current year? Habit S CORPORATIONS PART 4 () Whose accounting method will control the timing of income and deductions? (d) IFS realizes a gain upon an involuntary conversion, who makes the election under $ 1033 to limit recognition of gain? (e) Would it matter if the equipment would have been property described in $ 1221(a)(1) if held by A