ExpertHard1 markMultiple Choice
CPA · Question 46 · Area 4: Entity Taxation
An S Corp shareholder has a beginning stock basis of ,000. During the year, the following occurred (pro-rata share): Ordinary Income ,000; Cash Distribution ,000; Long-Term Capital Loss ,000. What is the shareholder's ending stock basis?
An S Corp shareholder has a beginning stock basis of ,000. During the year, the following occurred (pro-rata share): Ordinary Income ,000; Cash Distribution ,000; Long-Term Capital Loss ,000. What is the shareholder's ending stock basis?
Answer options:
A.
,000
B.
,000
C.
,000
D.
,000
How to approach this question
S Corp Basis Ordering: 1. Income items. 2. Distributions. 3. Loss/Deduction items. (Note: Partnership is different!).
Full Answer
B.,000✓ Correct
,000
Basis is adjusted for income items first (,000 + ,000 = ,000). Then distributions (,000 - ,000 = ,000). Then loss items (,000 - ,000 = ,000).
Common mistakes
Deducting losses before distributions (which matters if basis hits zero).
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