Hazel Is the Sole Shareholder of Maple Corporation in 2020

question 44

Essay

Hazel is the sole shareholder of Maple Corporation In 2020 Maple operated as a C Corporation and reported $15,000 of taxable income (and earnings and profits). On January 1, 2021, Maple elected S Corporation status. During 2021 Maple reported $12,000 of ordinary business income and no separately stated items. It also distributed $25,000 to Hazel. What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2021 (after accounting for the distribution)if her basis at the beginning of the year was $5,000?

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Definitions:

Irregular Bones

Bones that do not fall into the standard shape categories (long, short, flat), having complex shapes that provide protection, support, and leverage, such as the vertebrae.

Yellow Marrow

Connective tissue filling the cavities of bones; consists primarily of reticular fibers and fat cells; replaces red marrow in long bones and the skull.

Adipose Tissue

A type of body tissue containing stored fat that serves as a source of energy, provides insulation and protection to organs.

Vitamin D

A fat-soluble vitamin that is essential for maintaining healthy bones and teeth by facilitating calcium and phosphorus absorption.