The profits of a business owned by Taylor 60%) and Maggie 40%) for the current tax year are $100,000. If the business is a C corporation or an S corporation, there is no effect on Taylor's basis in her stock. If the business is a partnership or an LLC, Taylor's basis in her partnership interest or basis in her stock is increased by $60,000.

Question

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In an S corporation, Taylor's basis in her stock would increase by her share of the profits ($60,000). In a partnership or LLC, her basis would also increase by her share of the profits. However, in a C corporation, profits do not affect the shareholder's basis in stock.

The Profits of a Business Owned by Taylor 60%) and Maggie