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

question 65

Multiple Choice

Ian contributes $9,000 in exchange for a 30 percent interest in a C corporation. For 2017, the corporation reported a total loss of $35,000 and made no cash distributions. For 2018, 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 2018. Ian is in the 24% marginal tax bracket and 15% dividend rate in both 2017 and 2018. How much income tax did Ian save for 2017 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 2018?

• A) zero tax savings in 2017 and $750 tax in 2018
• B) zero tax savings in 2017 and $3,360 tax in 2018
• C) $2,520 tax savings in 2017 and $3,360 tax in 2018
• D) $2,520 tax savings in 2017 and $2,550 tax in 2018
• E) $2,940 tax savings in 2017 and $3,780 tax in 2018

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Definitions:

Aggressive Cues

Environmental or psychological triggers that can provoke aggressive responses or behaviors.

Climate

The average weather conditions of a region measured over extended periods of time, encompassing elements like temperature, humidity, and rainfall.

Crime

An illegal act punishable by a state or other authority.

Self-Esteem

An individual's subjective evaluation of their own worth or value, which can impact feelings of confidence and respect for oneself.