Ian Contributes $9,000 in Exchange for a 30 Percent Interest

Multiple Choice

Ian contributes $9,000 in exchange for a 30 percent interest in a C corporation. For 2016, the corporation reported a total loss of $35,000 and made no cash distributions. For 2017, the corporation reported net income of $45,000 and made a cash distribution to the shareholders. Ian received $5,000 of this cash distribution in 2017. Ian is in the 28% marginal tax bracket in both 2016 and 2017. How much income tax did Ian save for 2016 as a result of his share of loss from this corporation and how much income tax does Ian pay as a result of his ownership in the corporation for 2017?

A) zero tax savings in 2016 and $750 tax in 2017
B) zero tax savings in 2016 and $3,360 tax in 2017
C) $2,520 tax savings in 2016 and $3,360 tax in 2017
D) $2,520 tax savings in 2016 and $2,550 tax in 2017
E) $2,940 tax savings in 2016 and $3,780 tax in 2017