1. Lisa owns 70% of Doh’s stock (S-corporation) throughout the year. Lisa’s begi

Question

1. Lisa owns 70% of Doh’s stock (S-corporation) throughout the year. Lisa’s beginning of the year stock basis is $45,000. Lisa has an additional stock purchase (investment) this year of $10,000. Lisa loans the Corporation $5,000 this year. Doh Corporation has beginning AAA of $210,000. Doh Corporation’s Form 1120S shows the following information.

Sales 400,000

Charitable contribution 9,500

Long Term Capital Loss 3,000

Tax Exempt Interest Income 1,500

Cost of Goods Sold 280,000

a. What is Lisa’s end of the year stock basis?

b. What is Doh Corporation’s end of the year AAA balance?

Explanation / Answer

a. Lisa's end of the year stock basis Lisa's beginning of the year stock basis $45,000 Add: Addittional stock purchase this year $10,000           70% of ordinary income $84,000           Tax exempt interest income (70%) $1,050 Less: Charitable contribution (70%) ($6,650)           Long term capital loss (70%) ($2,100) Lisa's end of the year stock basis $131,300 Lisa's debt basis Lisa loan the corporation this year $5,000 Working note: Ordinary income Sales $400,000 Less: Cost of goods sold $280,000 Ordinary income $120,000 70% of ordinary income $84,000 b. Doh Corporation's end of the year AAA balance Beginning AAA balance $210,000 Add: Ordinary income $120,000 Less: Long term capital loss ($1,500) Ending AAA balance $328,500

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