On January 1, 2023, Kinney, Inc., an S corporation, reports $9,600 of accumulated E & P...

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On January 1, 2023, Kinney, Inc., an S corporation, reports $9,600 of accumulated E & P and a balance of $24,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year is $12,000. Kinney distributes $14,400 to each shareholder on July 1, and it distributes another $7,200 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Erin and Frank each report s 0X each for the 4,800 X dividend income for the July 1 distribution and $ December 21 distribution. Assuming that the shareholders have sufficient basis in their stock, Erin and Frank each receive a tax-free ✓$ 12,000 X distribution from AAA. Feedback Check My Work The amount of any distribution to an S corporation shareholder is equal to the cash plus the fair market value of any other property distributed. How the distribution is taxed depends upon whether the S corporation has C corporation accumulated earnings and profits (AEP). The AAA provides a mechanism to ensure that the earnings of an S corporation are taxed to shareholders only once. On January 1, 2023, Kinney, Inc., an S corporation, reports $9,600 of accumulated E & P and a balance of $24,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year is $12,000. Kinney distributes $14,400 to each shareholder on July 1, and it distributes another $7,200 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Erin and Frank each report s 0X each for the 4,800 X dividend income for the July 1 distribution and $ December 21 distribution. Assuming that the shareholders have sufficient basis in their stock, Erin and Frank each receive a tax-free ✓$ 12,000 X distribution from AAA. Feedback Check My Work The amount of any distribution to an S corporation shareholder is equal to the cash plus the fair market value of any other property distributed. How the distribution is taxed depends upon whether the S corporation has C corporation accumulated earnings and profits (AEP). The AAA provides a mechanism to ensure that the earnings of an S corporation are taxed to shareholders only once.

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The image shows a tax problem related to an S corporations distributions to its shareholders S corporations are passthrough entities for tax purposes meaning that income losses deductions and credits ... View the full answer