Barb and Chuck each own one-half the stock of Wren,Inc. ,an S corporation.Each shareholder has a stock basis of $175,000.Wren has no accumulated E & P.Wren's taxable income for the current year is $100,000,and it distributes $75,000 to each shareholder.Barb's stock basis at the end of the year is:
A)$0.
B)$100,000.
C)$150,000.
D)$175,000.
E)None of the above.

Question

Quizplus · Accepted Answer

The distribution of $75,000 reduces Barb's stock basis to $100,000 ($175,000 - $75,000). Therefore, her stock basis at the end of the year is $150,000 ($100,000 + $50,000 share of taxable income).

Barb and Chuck Each Own One-Half the Stock of Wren,Inc