ABC Was Formed as a Calendar-Year S Corporation with Alan

question 53

Essay

ABC was formed as a calendar-year S corporation with Alan, Brenda, and Conner as equal shareholders. On May 1, 2020, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares)to his solely owned C corporation, Conner, Incorporated ABC reported business income for 2020 as follows: (Assume that there are 365 days in the year.)
If ABC uses the specific identification method to allocate income, how much will it allocate to the S corporation short year and C corporation short year?

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Definitions:

Unrealized Loss

A loss that results from holding on to an asset that has decreased in price, but has not yet been sold or officially recorded in the financial statements.

Fair Value

The estimated market price of an asset or liability, considering factors like utility, demand, and supply conditions, to ensure an accurate valuation.

Unrealized Gains

Profits that have been made on paper through investments but have not yet been realized through the sale of those assets.

Common Stock

A type of ownership in a corporation, typically with voting rights and participation in dividends.