Suppose at the beginning of 2014, Jamaal's basis in his S corporation stock is $0, he has a $0 debt basis associated with a $10,000 loan he made to the S corporation and a $5,000 suspended loss from the S corporation. In 2014, Jamaal contributed $8,000 to the S corporation, and the S corporation had ordinary income of $4,000. Assume that Jamaal owns 40% of the S corporation. What is Jamaal's stock and debt basis at the end of 2014?

Question

Quizplus · Accepted Answer

Jamaal's stock basis is $0 because he has no basis in his S corporation stock at the beginning of the year and he contributed $8,000 to the S corporation, which increases his stock basis to $8,000. However, the S corporation had ordinary income of $4,000, which reduces Jamaal's stock basis to $4,000. Jamaal's debt basis is $4,600 because he has a $0 debt basis associated with a $10,000 loan he made to the S corporation at the beginning of the year and the S corporation had ordinary income of $4,000, which increases his debt basis to $4,600.

Suppose at the Beginning of 2014, Jamaal's Basis in His