Jonathan's basis in his S corporation stock is $4,000 at the end of the year before the corporation reports his $1,500 share of income and distributes $2,500 cash to him.What is his basis at the beginning of the following tax year?
A)0
B)$2,500
C)$3,000
D)$4,000

Question

Quizplus · Accepted Answer

Jonathan's basis increases by his share of income ($1,500) and decreases by the cash distribution ($2,500). So, $4,000 + $1,500 - $2,500 = $3,000.

Jonathan's Basis in His S Corporation Stock Is $4,000 at the End