Ramona is a 50% shareholder in a Subchapter S corporation.At the beginning of the year,her basis in the stock was $100,000.The corporation reported total ordinary income of $60,000 and total dividend income of $20,000.The corporation also borrowed an additional $20,000 from a local bank.What is the basis of Ramona's stock at the end of the year?

Question

Quizplus · Accepted Answer

Ramona's basis increases by her share of the corporation's income. Her share of the ordinary income is $30,000 (50% of $60,000) and her share of the dividend income is $10,000 (50% of $20,000). The loan does not affect her basis. Therefore, her ending basis is $100,000 + $30,000 + $10,000 = $140,000.

Ramona Is a 50% Shareholder in a Subchapter S Corporation