The Polaris S Corporation Has Operating Income of $50,000

question 51

Multiple Choice

The Polaris S Corporation has operating income of $50,000. Andrew is the sole shareholder of the corporation that has had the S election in effect since its inception. At the beginning of the current year, Andrew's basis in his S corporation stock is $2,000. During the year Andrew receives cash distributions totaling $55,000. How much income must Andrew recognize for the current tax year?

• A)$50,000 ordinary income; $55,000 dividend income.
• B)$50,000 ordinary income.
• C)$50,000 ordinary income; $3,000 capital gain.
• D)$55,000 dividend income; $3,000 capital gain.
• E)$55,000 dividend income.

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Definitions:

Cash Transfer

A movement of funds from one account or entity to another, which can occur electronically or as a physical exchange of money.

Purchasing Department

The Purchasing Department is responsible for procuring goods and services for a company, ensuring the right materials are available at the best prices to meet organizational needs.

Outstanding Checks

Outstanding checks refer to checks that have been written and recorded by an issuing company but not yet cashed or cleared by the bank.

Receiving Report

A document completed by the receiving staff of a company, detailing the items received, their quantities, and condition upon delivery.