Answer:
$20,000
Explanation:
Calculation to determine How much income does Ethan recognize this year from these transactions
First step is to calculate the share of ordinary income Amount
Share of ordinary income amount=$25,000 × 25%
Share of ordinary income amount=$6,250
Second step is to calculate AAA distribution
AAA distribution=[$50,000 + $25,000] × 25%]-[$30,000-($50,000 + $25,000 × 25%)]-
AAA distribution =$18,750-$11,250
AAA distribution=$7,500
Third step is to calculate the distribution treated as dividend
Distribution treated as dividend= $25,000 × 25%
Distribution treated as dividend= $6,250
Now let calculate the income recognized
Income recognized=$6,250+$7,500+$6,250
Income recognized=$20,000
Therefore How much income does Ethan recognize this year from these transactions is $20,000
