Question

Please use Excel and shiw work.

At the beginning of the tax year, Liz holds a $10,000 stock basis as the sole shareholder of Randy, Inc., an s corporation. During the year, Randy, Inc. reports the following. Taxable operating income 40,000 Net short-term capital loss 14,000 Cash distributions to Liz 57,000 Determine Liz's stock basis at the end of the year and the treatment of her cash distribution.

Answer 1

Based on the information available in the question, please find the calculation as below:-

D F G 151 152 153 154 155 156 157 158 159 160 161 Particulars Opening Stock Basis Add:- Taxable operating incom Total Less:- Cash distribution Basis subtotal Short term capital loss Ending basis Amount 10,000 40,000 50,000 57,000 14,000 Suspended

The formulas used in calculation are as follows:-

E F G 153 Particulars 154 Opening Stock Basis 155 Add:- Taxable operating income 156 Total 157 Less:- Cash distribution 158 Basis subtotal 159 Short term capital loss 160 Ending basis Amount 10000 40000 =SUM(F154:F155) 57000 =0 14000 0 Suspended

Lizzie would be required to recognize a Capital gain of $7,000 ($57,000 - $50,000) in order to bring the stock basis to 0 after the cash distribution.

Additionally , since she does not have any basis left in Randy Inc, the $14,000 of short term capital loss remains suspended.

Please let me know if you have any questions via comments and All the best :)