29. During 2011, Nick, a sole shareholder of a calendar year S Corporation, rece

Question

29. During 2011, Nick, a sole shareholder of a calendar year S Corporation, received a distrioution of $45,000. On December 31, 2010, his stock basis was $17,000. The corporation earned 570,000 ordinary income during the year. It has no accumulated E&P.; Which statement is correct? A. Nick recognized $10,000 LTCG B. Nick's return of capital is $2,000. C. Nick's stock basis is $42,000. D. None of the above. -30. Tony has been the sole shareholder of a calendar year S Corporation. At the end of 2011, Tony's stock basis is $45,500, and he received a distribution of $47,000. Corporate level accounts are as follows: $12,000 $4,000 PTI Accumulated E&P; $1,300 How much capital gain, if any, will Tony recognize? a. $200 b. $600 C. $900 d. $1,500

Explanation / Answer

29) The calculation of stockis in 2011 was:- 45000-17000= $28000

Nick earned ordinary income of $70000 out of which $28000, so the stock basis is $42000 (70000-28000).

Therefore, statement (c) is correct.

30) At the end of 2011 Tony's stock basis is $45500, for which he received distribution of $47000 ,so.clearly ilit can be said that Tony will recognise $1500(47000-45500) as capital gain.

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