Hazel Is the Sole Shareholder of Maple Corp

question 109

Essay

Hazel is the sole shareholder of Maple Corp. In 2018 Maple operated as a C corporation and reported $15,000 of taxable income (and earnings and profits). In 2018, Maple elected S corporation status. During 2019 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 2019 (after accounting for the distribution) if her basis at the beginning of the year was $5,000?

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Definitions:

Unwanted Contact

Interactions or communications that are undesired or uninvited, potentially causing discomfort or distress to the recipient.

Collectives

Groups or aggregates of people or items that share common features or are considered together.

Proximity

The physical or psychological closeness between people, which can influence attraction and relationship formation.

Circular Reactions

Repetitive actions observed in developmental psychology, especially in infants, where a particular action leads to a result that encourages the infant to repeat the action.