Bjorn Owns a 60% Interest in an S Corporation That

question 112

Multiple Choice

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2011. He also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How much income must Bjorn report from these businesses?

• A) $0 income from the S corporation and $30,000 income from the C corporation.
• B) $90,000 income from the S corporation and $30,000 income from the C corporation.
• C) $90,000 income from the S corporation and $0 income from the C corporation.
• D) $30,000 income from the S corporation and $30,000 of dividend income from the C corporation.
• E) None of the above.

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Definitions:

Present Value

The present value of a future amount of money or series of cash inflows, discounted by a particular return rate.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value agreed upon by a willing buyer and seller.

Capital Lease

A lease classified as a purchase by the lessee for accounting purposes, as it involves the transfer of ownership rights of the asset to the lessee.

Transactions Costs

Expenses incurred when buying or selling goods and services, which can include fees, taxes, and other charges.