Question

Beech Corp., an accrual-basis, calendar-year S corporation, has been an S corporation since its inception. At the beginning of the current year, Gold owned 50% of the 100 issued shares of Beech stock, and had a $3,000 tax basis in the Beech stock. During the current year, Beech had $200,000 in net business income and $4,000 in Oak County municipal bond interest income. Beech made no distributions to its shareholders. What was Gold’s tax basis in Beech stock at year end?

Answer 1

Answer:

Gold’s tax basis in Beech stock at year end = $105000

Explanation:

given data

net business income = $200,000

municipal bond interest income = $4,000

Gold owned =  50%

tax basis in the Beech stock = $3,000

to find out

What was Gold’s tax basis in Beech stock at year end

solution

first we get here total income earned that is express as

total income earned = net business income + municipal bond interest income    ......................1

put here value

total income earned = $200000 + $4000

total income earned = $204000

and

gold tax basis total income earn is here

gold tax basis total income earn = 50 % of total income earned

gold tax basis total income earn = $102000

so

Gold’s tax basis in Beech stock at year end is

Gold’s tax basis in Beech stock at year end = gold tax basis total income earn  + tax basis in the Beech stock   ......................2

Gold’s tax basis in Beech stock at year end = $102000 + $3,000

Gold’s tax basis in Beech stock at year end = $105000