Theodore is the sole shareholder of the Copenhagen Corporation, which has been an S corporation since 2014. On January 1, 2019, the corporation had $25,000 in accumulated earnings and profits from the period when the corporation was a C corporation. The balance in its accumulated adjustments account was $5,000. Theodore’s basis in his Copenhagen stock was $15,000. During the year ended December 31, 2019, the corporation had $15,000 of non-separately stated profit and no separately stated items of income or loss. On December 31, 2019, the corporation distributed $60,000 cash to Theodore.

1. Compute the amount of income that Theodore will recognize as a result of the December 31 distribution.
2. What types of income will Theodore recognize from the distribution?

Answer rating: 100% (QA)

Step 1 Theodore is the sole shareholder of the Copenhagen Corporation which has been an S corporation since 2014 On January 1 2019 the corporation had 25000 in accumulated earnings and profits from th... View the full answer