Suppose at the beginning of 2018, Jamaal's basis in his S corporation stock is $1,000, and he has a $10,000 debt basis associated with a $10,000 loan he made to the S corporation. In 2018, Jamaal's share of S corporation income is $4,000, and he received a $7,000 distribution from the S corporation. How much income does Jamaal report in 2018 from these transactions?

Question

Quizplus · Accepted Answer

$4,000 ordinary income plus a capital gain of $2,000 for the distribution in excess of stock basis ($7,000 distribution − $5,000 stock basis ($1,000 original basis + $4,000 increase in basis from operating income).

Suppose at the Beginning of 2018, Jamaal's Basis in His