Lemon Corporation Incurs the Following Transactions Lemon Maintains a Valid S Election and Does Not Distribute

question 45

Multiple Choice

Lemon Corporation incurs the following transactions. $$\begin{array} { l c } \text { Net income from operations } & \$ 110,000 \\\text { Interest income from saving account } & 5,000 \\\text { Long-term capital gain from sale of securities } & 9,000 \\\text { Short-term capital loss from sale of securities } & 4,000\end{array}$$ Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, which of the following must Patty recognize? Ignore the 20% QBI deduction.

• A) Ordinary income of $115,000 and long-term capital gain of $5,000.
• B) Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.
• C) Ordinary income of $120,000.
• D) Capital gain of $120,000.

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Definitions:

Legally Sufficient

Adequate to meet the required standards of law, usually referring to evidence or grounds for action.

Denney v. Reppert

A legal case demonstrating the principle that a reward can only be claimed by those who have knowledge of the reward offer before completing the actions required for the reward.

Bank Robber

An individual who illegally steals money or valuables from a bank, typically through the use of force, threat, or deceit.

Past Actions

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