ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner ase

Question

ABC was formed as a calendar-year S corporation with Alan, Brenda and Conner asequal shareholders. On May 1, 2010, ABC's S election was terminated after Conner sold hisABC shares (one-third of all shares) to his solely owned C corporation Conner, Inc. ABCreported business income for 2010 as follows:(assume that there are 365 days in the year)

January 1 through April 30 (120days) 200,000
May through December 31 (245 days)530,000
January 1 through December 31 730,000

If ABC uses the specific identification method to allocate income, how much will it allocateto the S corporation short year and C corporation short year?

Explanation / Answer

S corporation short tax year = 730000/365*120 $                                 240,000.00 C corporation short tax year = 730000/365*245 $                                 490,000.00

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