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

question 104

Multiple Choice

Ian contributes $9,000 in exchange for a 30 percent interest in a C corporation. For 2016, the corporation reported a total loss of $35,000 and made no cash distributions. For 2017, 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 2017. Ian is in the 28% marginal tax bracket in both 2016 and 2017. How much income tax did Ian save for 2016 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 2017?

• A) zero tax savings in 2016 and $750 tax in 2017
• B) zero tax savings in 2016 and $3,360 tax in 2017
• C) $2,520 tax savings in 2016 and $3,360 tax in 2017
• D) $2,520 tax savings in 2016 and $2,550 tax in 2017
• E) $2,940 tax savings in 2016 and $3,780 tax in 2017

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Definitions:

Emotional Abuse

A form of abuse characterized by the use of words, actions, and other methods to control, intimidate, or inflict emotional harm on another person.

Child Care

The supervision and care of children, typically performed by someone other than the child's parents.

Family Violence

Any form of abuse, violence, or neglect that occurs within a family.