You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.

Question

Quizplus · Accepted Answer

The ending stock basis for a shareholder is calculated as:
Beginning stock basis + Share of income (or loss) + Additional contributions – Distributions 
Here are the given facts:
- Beginning stock basis: $17,000
- Share of income: $63,000 x 40% = $25,200
- Additional contributions: $2,500
- Distributions: $4,580
Using the formula: 
$17,000 + $25,200 + $2,500 - $4,580 = $40,120 
Since the shareholder owns 40% of the S corporation, we need to multiply this result by 100/40 to get her ending stock basis: 
$40,120 x 100/40 = $100,300
Therefore, the correct answer is B) $74,120.

You Are Given the Following Facts About a 40% Owner