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

To calculate the ending stock basis, we need to start with the beginning stock basis, then add the shareholder's pro-rata share of income, and subtract any distributions made during the year.

Assuming that the shareholder's beginning stock basis was $60,000, we can calculate her pro-rata share of income as follows:

- Net income for the S corporation: $250,000 
- Shareholder's ownership percentage: 40% 
- Shareholder's share of income: 0.4 x $250,000 = $100,000

So the shareholder's stock basis would be:

Beginning stock basis: $60,000 
Plus: Pro-rata share of income: $100,000 
Equals: Subtotal: $160,000 
Minus: Distributions: $85,880 
Equals: Ending stock basis: $74,120

Therefore, the correct answer is B) $74,120.

You Are Given the Following Facts About a 40% Owner