The Vanity Corporation Organized and Began Operations in January

question 68

Essay

The Vanity Corporation organized and began operations in January. The corporation's ten equal shareholders elect to have Vanity taxed as an S corporation, and the election and necessary consents are filed in a timely manner. For its first tax year ended December 31, Vanity has ordinary income of $64,000 and short-term capital gains of $16,000. During the year, it distributes $30,000 in cash equally to its ten shareholders. For the year, how much income should each shareholder report and how should it be characterized?

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Definitions:

Tympan

Another term for the tympanic membrane or eardrum, which vibrates in response to sound waves.

-Cusis

A suffix used in medical terms to denote hearing, as in presbycusis, age-related hearing loss.

Aur/i

A prefix related to the ear or hearing.

Rhin/o

A prefix relating to the nose, used in medical terms.