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Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year:

Sales	$650,000
Corporate dividend (from 5% owned corporation)	60,000
Municipal bond interest	25,000
Long-term capital gain	0
Short-term capital loss	(8,000)
Cost of goods sold	320,000
Depreciation	65,000
Nondeductible fines	4,000
Advertising	7,000
Utilities	6,000
Rent	5,000

Furthermore, Sunshines liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year.

1. Assume that Sunshine Company is a general partnership. Alvin contributed $60,000 in exchange for a 60% partnership interest when it was formed this year. Ann contributed $40,000 in exchange for a 40% partnership interest at that same time. Neither made any other contribution to the partnership this year. Alvin received a $2,400 per month guaranteed payment ($28,800 in total) while Ann received no guaranteed payment (as specified in the partnership agreement). The company made a $55,000 partial distribution of profits at the end of the year 2019.
   1. Calculate partnership ordinary income (loss) and separately stated items to be reported on Form 1065.
   2. What amount and type of income must Alvin report on his individual Form 1040 tax return?
   3. What amount of Alvins income will be subject to self-employment tax?
   4. What is Alvins basis in his Sunshine Company partnership interest at the end of the year?
   5. Note that you do not need to complete Form 1065 but this form and related schedules will be a useful guide in completing this portion of the assignment.

2. Assume that Sunshine Company is an s-corporation. Alvin contributed $60,000 in exchange for 60% of the stock while his wifes best friend, Ann, contributed $40,000 in exchange for the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 in total). Ann doesnt work for the company so she received no salary. The company made a $55,000 partial distribution of profits at the end of the year 2019.
   1. Calculate Sunshines ordinary income and separately stated items to be reported on Form 1120S.
   2. What amount and type of income must Alvin report on his individual Form 1040 tax return?
   3. What amount of Alvins income will be subject to self-employment tax?
   4. What is Alvins basis in his Sunshine Company stock at the end of the year?

Note that you do not need to complete Form 1120-S but this form and related schedules will be a useful guide in completing this portion of the assignment.

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