Ian Contributes $9,000 in Exchange for a 30 Percent Interest

question 60

Multiple Choice

Ian contributes $9,000 in exchange for a 30 percent interest in a C corporation.For 2014,the corporation reported a total loss of $35,000 and made no cash distributions.For 2015,the corporation reported net income of $45,000 and made a cash distribution to the shareholders.Ian received $5,000 of this cash distribution in 2015.Ian is in the 28% marginal tax bracket in both 2014 and 2015.How much income tax did Ian save for 2014 as a result of his share of loss from this corporation and how much income tax does Ian pay as a result of his ownership in the corporation for 2015?

• A)zero tax savings in 2014 and $750 tax in 2015
• B)zero tax savings in 2014 and $3,360 tax in 2015
• C)$2,520 tax savings in 2014 and $3,360 tax in 2015
• D)$2,520 tax savings in 2014 and $2,550 tax in 2015
• E)$2,940 tax savings in 2014 and $3,780 tax in 2015

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Definitions:

Vallate Papillae

The largest taste buds with a dome-shape located on the posterior side of the tongue, containing hundreds of taste buds.

Auditory Tubes

Also known as Eustachian tubes, these are canals that connect the middle ear with the nasopharynx and help equalize pressure between the ear and the throat.

Tympanic Membranes

The tympanic membranes, or eardrums, are thin tissues that separate the outer ear from the middle ear, vibrating in response to sound waves.

Lacrimal Canaliculi

Small channels located in each eyelid that drain tears from the eye's surface into the lacrimal sac as part of the tear drainage system.