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

question 40

Short Answer

ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner as equal shareholders. On May 1, 2014, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABC reported business income for 2014 as follows (assume that there are 365 days in the year): $$\begin{array} { | l | r | } \hline { \text { Period } } & { \text { Income } } \\\hline \text { January 1 through April } 30 \text { (120 days) } & \$ 200,000 \\\hline \text { May } 1 \text { through December } 31 \text { (245 days) } & \mathbf { 5 3 0 , 0 0 0 } \\\hline \text { January } 1 \text { through December } 31 & \$ 730.000 \\\hline\end{array}$$ 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?

---

Definitions:

Tax Revenues

The income that is gained by governments through taxation—funding various public expenses.

Transfer Payments

Monetary payments made by governments that do not correspond to the provision of a good or service, such as social security payments or welfare benefits.

Federal Budget

The government's estimate of revenue and expenditure for a specific fiscal year, detailing how public funds will be allocated.

Contractionary Influence

Economic policies or conditions intended to reduce the size of the economy by decreasing the money supply or government expenditures, typically to combat inflation.