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 calculation of ending stock basis for a 40% owner of an S corporation is as follows:
Beginning stock basis + (Pro-rata share of income) – (Pro-rata share of losses) – (Distributions taken)
Given information:
Beginning stock basis = $70,000
Pro-rata share of income = $10,000
Pro-rata share of losses = $4,280
Distributions taken = $2,600
Putting these values in the formula, we get:
Ending Stock basis = $70,000 + $4,000 - $1,712 - $1,888 = $74,120
Therefore, the best choice is B.

You Are Given the Following Facts About a 40% Owner