Homework Answers
Stock basis includes all the income i.e. ordinary income, tax exempt income. Stock basis will be reduced if there is a loss.Any distribution made to shareholders will be reduced from basis.
Linda's basis in S corporation is calculated as follows:
| Linda's basis at December 31,2017 | $14,000 | |
| Add: Share of Linda in 2018 Income ($80,000*30%) | $24,000 | |
| Less:Distribution received from S corporation during 2018 | ($20,000) | |
| Linda's basis December 31, 2018 | $18,000 |
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