Jake is the sole shareholder of an S corporation that earned $60,000 in 2016.The corporation was short on cash and therefore distributed only $15,000 to Jake in 2016.Jake is required to recognize $60,000 of income from the S corporation in 2016.

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As the sole shareholder of an S corporation, Jake is required to recognize all ordinary income, including income that is retained by the corporation and not distributed to him. Therefore, Jake is required to recognize the full $60,000 of income from the S corporation in 2016, regardless of the amount of cash distributed to him.

Jake Is the Sole Shareholder of an S Corporation That