Zebra Corporation Has Always Been an S Corporation and Is

question 91

Essay

Zebra Corporation has always been an S corporation and is 100% owned by Paul. Paul has a basis of $40,000 in his Zebra stock at the beginning of the year. During the year, Zebra has an ordinary loss of $20,000 and a long-term capital gain of $10,000. In addition, Zebra Corporation distributed $55,000 in cash to Paul on December 1. Will the distribution cause Paul to recognize a gain? If so, what are its amount and character?

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Definitions:

Over-Inflated

Refers to a situation where an object, such as a tire, is filled with air or gas beyond the recommended pressure.

Center Of Treads

The midpoint across the width of tire treads, often used as a measurement reference for tire alignment and wear.

Accelerated Wear

Increased rate of wear on materials or components, often due to excessive loading, poor lubrication, or abrasive conditions, leading to premature failure.

Bias Ply

A tire construction geometry in which the plies are laid either diagonally or at an angle of 35 degrees.