CPA Study Group
So we're just going to ignore the $24,000 that Serena gets in cash distribution from the S-Corp? Is it because of the wording of the 4 choices?
actually we not ignoring the $24,000 it is part of the answer. we know that S-corporation are pass through entity so Serena is actually recognizing income of $60,000 and since she received a dividend of $24,000 which represent 30% then she will recognize $36,000 extra, both are taxable. as for Jan she will only recognize $24,000 since her income comes from a C corporation. As we know C corp. are not pass through entities.