Toyland Corporation, an S corporation, uses the calendar year as its tax year. Bob, Alice, and Carter own 60, 30, and 10 shares, respectively, of the Toyland stock. Carter’s basis for his stock is $26,000 on January 1 of the current year (assume a non-leap year). On June 30, Alice gifted one-half of her stock to Mike. On November 30, Carter sold his stock to Mike for $45,000. Toyland reports the following results for the current year:
Ordinary income ……………………..$120,000
Long-term capital loss ……………….. 10,000
Charitable contributions ……………… 6,000
a. What amount of income, loss, or deduction do the four shareholders report (assuming the corporation makes no special allocation election)?
b. What gain or loss does Carter recognize when he sells the Toyland stock?