The Polaris S Corporation Has Operating Income of $50,000

question 51

Multiple Choice

The Polaris S Corporation has operating income of $50,000. Andrew is the sole shareholder of the corporation that has had the S election in effect since its inception. At the beginning of the current year, Andrew's basis in his S corporation stock is $2,000. During the year Andrew receives cash distributions totaling $55,000. How much income must Andrew recognize for the current tax year?

• A)$50,000 ordinary income; $55,000 dividend income.
• B)$50,000 ordinary income.
• C)$50,000 ordinary income; $3,000 capital gain.
• D)$55,000 dividend income; $3,000 capital gain.
• E)$55,000 dividend income.

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Definitions:

Tax

A mandatory charge or alternative form of financial levy extracted from a taxpayer by governmental authorities for the aim of supporting governmental spending and numerous public financial commitments.

Diversity

entails the inclusion and representation of different types of people and viewpoints in a group, organization, or society, valuing differences in race, gender, age, cultural background, etc.

Value-based Management

Management that actively develops, communicates, and enacts shared values.

Corporate Culture

encompasses the beliefs, behaviors, values, and symbols that are accepted generally by employees of an organization, influencing its identity and actions.