Ramona is a 50% shareholder in a Subchapter S corporation.At the beginning of the year,her basis in the stock was $100,000.The corporation reported total ordinary income of $60,000 and total dividend income of $20,000.The corporation also borrowed an additional $20,000 from a local bank.What is the basis of Ramona's stock at the end of the year?

Question

Quizplus · Accepted Answer

Ramona's basis in the stock at the end of the year is calculated by starting with her initial basis ($100,000), adding her share of the corporation's ordinary income (50% of $60,000 = $30,000), and adding her share of the dividend income (50% of $20,000 = $10,000). The corporation's borrowing does not affect her basis. Therefore, her ending basis is $100,000 + $30,000 + $10,000 = $140,000.

Ramona Is a 50% Shareholder in a Subchapter S Corporation