On January 1, 2022, Kinney, Inc., an S corporation, reports $33,600 of accumulated E & P and a balance of $84,000 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 $42,000. Kinney distributes $50,400 to each shareholder on July 1, and it distributes another $25,200 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction.
On January 1, 2022, Kinney, Inc., an S corporation, reports $33,600 of accumulated E & P and a balance of $84,000 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 $42,000. Kinney distributes $50,400 to each shareholder on July 1, and it distributes another $25,200 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction.
Chapter20: Corporations And Parterships
Section: Chapter Questions
Problem 45P
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Transcribed Image Text:Problem 12-26 (Algorithmic) (LO. 6, 7)
On January 1, 2022, Kinney, Inc., an S corporation, reports $33,600 of accumulated E & P and a balance
of $84,000 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 $42,000.
Kinney distributes $50,400 to each shareholder on July 1, and it distributes another $25,200 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 $
7,600 dividend income for the July 1 distribution and $
3,800 each for the December 21 distribution. Assuming that the shareholders have sufficient
basis in their stock, Erin and Frank each receive a tax-free
63,000 distribution from
AAA.
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