Question

Jerry, a U.S. Citizen, is a sole shareholder of S corporation, named "Jerry Machine Tool Company". He has $5,000 basis in stock. Jerry also loaned money to S Corporation and has basis of $3,000. Assume no AEP, calendar year and beginning balance of AAA and OAA accounts are zero. The Corp. made $10,000 in the ordinary income which was reported on Jerry’s K-1. Corp. also received a tax- free interest income of $4,000 which was also reported on K-1. Jerry took a distribution of $21,000 during the year from the S corporation. Please calculate the year-end balances in AAA account, OAA Account, Jerry’s stock basis and loan basis showing the effects of the distribution. Please show all calculations.

Answer 1

Solution that Given $S,000 is basis of Stock $ 3000 basis Loaned money A SSume no AEP balance of AAAOAA and bgining Calender Yar ase 2ero accounts lo)o00 Crcdinny Reteivecl atax Aree intome $4,000 ncome adishinition $21,000 Terry too k Machine Tool Compan paoticular Amount closing A A A opening 10,000 Ocinany Income 10,000 Total -10,000 Distribution cloting

Amount ponticeular closingtock basis Opening ordlinay Tncome 5,000 10,000 4/000 Mterest Total a,000 DIstibuton -19000 closing O closing Laan ban's Opning 3,000 Ostributons -21000 Closing looo NOte to adlded in the AAA account The Oelinay income acepled Shal not form part of AAA incluale in toCk onich is baris of Femy Tt was But cistribuded exce ss of balance af The amaunt wil be deducd from tock bans Theneaftr AA A from Aoan