Janna had a tax basis of $15,250 at the end of 2016 in her Mimikaki stock (Mimik

Question

Janna had a tax basis of $15,250 at the end of 2016 in her Mimikaki stock (Mimikaki has been an S corporation since inception). In 2017, Janna was allocated $20,250 of ordinary income from Mimikaki.

What is the amount and character of gain she recognizes from end of the year distributions in each of the following alternative scenarios, and what is her stock basis following each distribution? (Leave no answer blank. Enter zero if applicable.)

a. Mimikaki distributes $10,125 to Janna.

Gain: What is the amount and character?

Stock Basis: What is the amount and character?

b. Mimikaki distributes $20,250 to Janna.

Gain: What is the amount and character?

Stock Basis: What is the amount and character?

c. Mimikaki distributes $30,375 to Janna.

Gain: What is the amount and character?

Stock Basis: What is the amount and character?

d. Mimikaki distributes $40,500 to Janna.

Gain: What is the amount and character?

Stock Basis: What is the amount and character?

Explanation / Answer

PART   A

At the time of distribution, Janna’s stock basis is 35500 (15250 orginial basis + 20250 ordinary income allocation). On the distribution, Janna recognizes $0 gain, and distribution reduces her stock basis to $25375 (35500 stock basis – 10125 distribution)

PART B

At the time of distribution, Janna’s stock basis is 35500 (15250 orginial basis + 20250 ordinary income allocation). On the distribution, Janna recognizes $0 gain, and distribution reduces her stock basis to $15250 (35500 stock basis – 20250 distribution)

PART C

At the time of distribution, Janna’s stock basis is 35500 (15250 orginial basis + 20250 ordinary income allocation). On the distribution, Janna recognizes $0 gain, and distribution reduces her stock basis to $5125 (35500 stock basis – 30375 distribution)

PART D

At the time of distribution, Janna’s stock basis is 35500 (15250 orginial basis + 20250 ordinary income allocation). On the distribution, Janna recognizes $5000 gain, and distribution reduces her stock basis to $0

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