Question

Lemon Corporation incurs the following transactions: net income from operations $110,000, interest income from savings account $5,000, long-term capital gain from the sale of securities $9,000, and short-term capital loss from the sale of securities $4,000. Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty. As a result, Patty must recognize (ignore the 20% QBI deduction):

Answer 1

Patty must recognize ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.

Step-by-step explanation:

From the information the question, we can obtain the following:

Ordinary income = Net income from operations + Interest income from savings account = $110,000 + $5,000 = $115,000

Long-term capital gain = Long-term capital gain from the sale of securities = $9,000

Short-term capital loss = Short-term capital loss from the sale of securities = $4,000

As a result, Patty must recognize ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.