Reference no: EM132783592

Problem 1: Tower Corporation, a calendar year taxpayer, has been an S corporation for several years. David and John each own 50% of Tower's stock. On September 1 of the current year (assume a non- leap year), Tower issues additional common stock to Hill Corporation for cash. David, John, and Hill each end up owning one- third of Tower's stock. Tower reports ordinary income of $ 250,000 and a short- term capital loss of $ 30,000 in the current year. Eighty percent of the ordinary income and all the capital loss accrue after Hill purchases its stock. Tower makes no distributions to its shareholders in the current year. What income and losses do Tower, Hill, David, and John report as a result of the current year's activities? If there is more than one possible method, discuss both methods.