1. In 2022, a corporation earns $65,000 from its business

1. In 2022, a corporation earns $65,000 from its business operations and has $10,000 of dividend income. It donates $12,000 to charity. Show how you determine taxable income.

2. Connie contributes a machine (basis $3,000, value $5,000) to her controlled corporation in exchange for stock worth $4,200 and $800 in cash. 

(a) How much gain will she recognize? 

(b) What’s her basis in her stock? 

(c) What’s the corp’s basis in the machine?

3. Carl has a basis of $7,500 in his stock. The corporation has $1,500 of E&P. Carl receives a distribution of $10,000. 

(a) How much dividend income does he have?

(b) How much capital gain does he have, if any? 

(c) What’s his new basis in his stock?