You are given the following facts about a 50% owner of an S corporation.Compute her ending stock basis. $\begin{array}{lr}
\text { Increase in AAA } & \$ 32,000 \
\text { Increase in OAA } & 6,300 \
\text { Payroll tax penalty } & 2,140 \
\text { Owner's beginning stock basis } & 39,800 \
\text { Tax-exempt interest income } & 4,800 \
\text { Insurance premiums paid (nondeductible) } & 2,700 \
\text { Owner's additional stock purchases } & 22,000
\end{array}$ ?

Question

Quizplus · Accepted Answer

To compute the ending stock basis for the 50% owner of an S corporation, you start with the owner's beginning stock basis and adjust it for various increases and decreases. Here's how:1. **Beginning stock basis:** $39,8002. **Add Increase in AAA (Accumulated Adjustments Account):** $32,0003. **Add Increase in OAA (Other Adjustments Account):** $6,3004. **Add Tax-exempt interest income:** $4,8005. **Add Owner's additional stock purchases:** $22,000The payroll tax penalty and insurance premiums paid are not added to the stock basis because they are not income items or capital contributions. They are either nondeductible expenses or penalties.So, the calculation is as follows:$$39,800 + 32,000 + 6,300 + 4,800 + 22,000 = 104,900$$However, none of the provided options match this calculation directly. Given the options and the typical adjustments for an S corporation shareholder's stock basis, it seems there might have been a mistake in the calculation or interpretation of the options. Based on the standard approach to calculating ending stock basis with the given information, none of the options directly match the expected outcome. If we strictly follow the calculation provided, there seems to be a discrepancy with the options given. Given the context and the usual adjustments for an S corporation shareholder's stock basis, the correct approach involves adding the beginning stock basis, increases in AAA, increases in OAA, tax-exempt interest income, and the owner's additional stock purchases. However, without adjustments or corrections to the provided options or additional specific instructions on handling each item, a direct match to the options is challenging to justify. Re-evaluating the calculation and considering typical adjustments:- Starting with the beginning stock basis: $39,800- Adding the increase in AAA: $32,000- Adding the increase in OAA: $6,300- Including the tax-exempt interest income (since it increases the basis): $4,800- Including the owner's additional stock purchases: $22,000This leads to a recalculated total that should be considered against the options provided. However, given the initial calculation and standard considerations, there seems to be a misunderstanding or misapplication regarding the options provided (A, B, C, D) and the calculation process outlined. Therefore, based on the standard approach and the information given, a direct and accurate selection from the provided options (A, B, C, D) is challenging without further clarification or correction either in the calculation approach or the interpretation of the provided options.

You Are Given the Following Facts About a 50% Owner