Daniel is the sole shareholder in Helio, Inc., a calendar-year corporation.   After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015.  At the beginning of 2021, Daniel had a stock basis in Helio of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000.  This year, Daniel receives a $50,000 distribution.  Per his k-1 from Helio, Inc., Daniel has a $4,000 long-term capital gain and $10,000 of non-separately stated income.  How do you determine Daniel’s ending balance in AAA, AEP and stock basis? How much income, gain or loss will Daniel have as a result of his interest in Helio, inc.?

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter22: S Corporations
Section: Chapter Questions
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Daniel is the sole shareholder in Helio, Inc., a calendar-year corporation.   After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015.  At the beginning of 2021, Daniel had a stock basis in Helio of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000. 

This year, Daniel receives a $50,000 distribution.  Per his k-1 from Helio, Inc., Daniel has a $4,000 long-term capital gain and $10,000 of non-separately stated income. 

  1. How do you determine Daniel’s ending balance in AAA, AEP and stock basis?
  2. How much income, gain or loss will Daniel have as a result of his interest in Helio, inc.?  
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