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Luna owns 80% of Good stock (S-corporation) throughout the year. Luna’s beginning of the year stock...

  1. Luna owns 80% of Good stock (S-corporation) throughout the year. Luna’s beginning of the year stock basis is $25,000. Luna has an additional stock purchase (investment) this year of $15,000. Luna loans the Corporation $150,000 this year. Good Corporation has beginning AAA of $163,000. Good Corporation’s Form 1120S shows the following information. 5 points

Sales 600,000

Long Term Capital Loss 6,000

Cost of Goods Sold 350,000

Tax Exempt Interest Income 5,000

Charitable contribution 60,000

Distribution to Luna 40,000

  1. What is Luna’s end of the year stock basis?

  2. What is Good Corporation’s end of the year AAA balance?

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Answer #1

a. Luna's end of the stock basis

Stock Bases in the beginning 25000

purchase 15000

Ordinary business income{(600000-350000)*80%} 200000

non dividend distribution (40000)

Capital loss(6000*80%) (4800)

Tax exempt interest income(5000*80%)    4000

Charitable contribution(60000*80%) (48000)

Stock Basis year end 151200

  

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