Bev and Cabel each own one-half of the stock of Finch, Inc., an S corporation with no accumulated E & P.Bev's basis in the Finch stock is $225,000.Finch's taxable income for the current year is $100,000, and it distributes $180,000 to each shareholder.Bev's stock basis at the end of the year is:
A)$0.
B)$45,000.
C)$95,000.
D)$100,000.

Question

Quizplus · Accepted Answer

Bev's beginning basis was $225,000. She received a distribution of $90,000 ($180,000 x 1/2) which decreases her basis to $135,000. Her share of the income for the year is $50,000 ($100,000 x 1/2) which increases her basis to $185,000. Therefore, her ending basis is $185,000.

Bev and Cabel Each Own One-Half of the Stock of Finch