Message : This problem is from Federal income taxation of Corporations and Shareholder 7th edition (James S. Eustice) 5A (9) The stock of X is owned equally by two shareholders: Y (an individual with a stock basis of $100) and A (an individual with stock basis of $40). X uses the accrual method, A and Y use the cash method, and all use the calendar year. (Assume 1059 does not apply). Use a 34% corporate tax rate in this problem. X has always been an S corporation. During the current year, X accrued income and expenses as follows: Gross income from Business $500 Dividends on AT&T stock (consider &243) $100 Interest on municipal bonds (&103) 100 Capital gain 100 Total $800 Deductible &162(a)(1) business expense 430 Noncaptial expenses not deductible under &162(e) 90 Capital losses (see &1211 (a) 146 Total 66 Net $134 Suppose that Y is an individual and that X has always been an S Corporation. a) Alternatively, X has E&P of 100 from years before it wa an S corporation and nothing in its AAA from prior S years. The $100 is capital gain from the sale of stock held for investment and the $500 gross income from businesses is also gross receipts from business. Assume the stock for investment was acquired whil an S corporation. Assume other facts remaining the same including the $100 distribution to each shareholder. Discuss the following, showeing calculation where appropriate. (1) 1374 tax, (2) 1375 tax (calculate excess passive income) and consequences, and (3) AAA and E&P and basis. For the answer can you please explain how do you get the result.