You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

Question

Quizplus · Accepted Answer

To calculate the ending stock basis, we need to add the shareholder's share of income (or loss) and subtract any distributions or withdrawals made during the year. 
Here are the calculations:
Beginning Stock Basis = 0 (not given)
Plus: Share of Income = 100,000 x 40% = 40,000
Minus: Distributions/Withdrawals = 10,000
Ending Stock Basis = 40,000 - 10,000 = $30,000
Now, we need to add the ending stock basis to the shareholder's share of any loans made to the S corporation during the year. No information is provided about loans, so we can assume that there were none.
Therefore, the ending stock basis is:
40% x $74,120 = $29,648. 
Rounded to the nearest dollar, this gives us a final answer of $74,120.

You Are Given the Following Facts About a 40% Owner