Oscar buys a 10% interest in Britanny Corporation paying $92,000 cash on January 1, 2017. During 2017, Britanny Corporation reports a loss of $30,000 and pays cash dividends to shareholders of $10,000. For 2018, Britanny Corporation has a loss of $60,000 and pays cash dividends of $20,000. If Britanny Company is organized as an S Corporation, Oscar's basis in the Britanny Corporation stock at the end of 2018 is:

Question

Quizplus · Accepted Answer

Oscar's basis is adjusted for his share of the corporation's income and losses and dividends. Starting with $92,000, subtract 10% of the 2017 loss ($3,000) and 10% of the 2018 loss ($6,000), and subtract 10% of the dividends paid in 2017 ($1,000) and 2018 ($2,000). This results in a basis of $80,000.

Oscar Buys a 10% Interest in Britanny Corporation Paying $92,000