On January 1, 2012, P Corporation acquired all the stock of S Corporation for $8,000 and elected to file a consolidated return.On the acquisition date, S had accumulated earnings and profits of $2,000 and no current EP for 2012.S distributed $500 to P in 2012.In 2013, S had earnings of $1,300 and in 2014 an operating loss of $2,100.Determine P's basis in the S stock as of December 31, 2014.

Question

Quizplus · Accepted Answer

P's basis in S stock starts at $8,000. It is reduced by the $500 distribution in 2012 and increased by S's 2013 earnings of $1,300. The 2014 operating loss of $2,100 further reduces the basis. Calculation: $8,000 - $500 + $1,300 - $2,100 = $6,700.

On January 1, 2012, P Corporation Acquired All the Stock