Hazel Is the Sole Shareholder of Maple Corp

question 29

Essay

Hazel is the sole shareholder of Maple Corp. In 2016 Maple operated as a C corporation and reported $15,000 of taxable income (and earnings and profits). In 2016, Maple elected S corporation status. During 2017 Maple reported $12,000 of ordinary business income and no separately stated items. It also distributed $25,000 to Hazel. What is the amount and character of income Hazel must recognize on the distribution? What is Hazel's stock basis at the end of 2017 (after accounting for the distribution) if her basis at the beginning of the year was $5,000?

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Definitions:

Communication

Communication is the process of exchanging information, ideas, thoughts, and feelings through verbal or non-verbal means.

Operational Justice

Refers to the fairness in the processes and procedures that resolve disputes and allocate resources.

Perceived Fairness

The subjective assessment of whether an action, decision, or treatment appears just, equitable, or reasonable to an individual.

Teams Competency

The collective skills, abilities, and expertise of a team that enable it to perform effectively.