Samuel is the sole shareholder of Small, Inc. (an S-corporation). Small, Inc. elected S-Corporation status in 2015 after 10 years of operation as a C-corporation. As of December 31, 2020, Small, Inc. had a positive balance in AEP (accumulated earnings and profits) of $15,000 and a positive balance in AAA (accumulated adjustments account) of $10,000. On January 1, 2021, Small, Inc. distributed property to Samuel with a fair market value of $80,000 and an adjusted basis of $20,000. Samuel’s stock basis in Small, Inc. (prior to the distribution) was $160,000. Samuel is in the 37% tax bracket and does not have any capital gain or losses. Determine the tax consequences to Samuel from this distribution What is Samuel’s ending stock basis? What are the tax consequences to Small, Inc. in making this distribution to Samuel?

Answer rating: 100% (QA)

S corporation is referred to as a business entity that has elected to ... View the full answer