Robert Elk Paid $100,000 for All of the Single Class

question 101

Essay

Robert Elk paid $100,000 for all of the single class of stock of Elkom Corporation, an electing S corporation, when incorporated in January, 2007. Elkom's operating results and dividend distribution are as follows:
$$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Tax Year } \\\text { Ending }\end{array} & \begin{array} { c } \text { Ordinary } \\\text { Income }\end{array} & \text { Distribution } \\\hline 2007 & ( \$ 40,000 ) & \\2008 & 60,000 & \$ 20,000 ( 9 / 30 ) \\2009 & 30,000 & \\\hline\end{array}$$ What is Elk's basis for his Elkom stock on December 31 of 2007?

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Definitions:

NMR Protons

Refers to the hydrogen atoms in a molecule that are detectable by nuclear magnetic resonance spectroscopy, providing information on molecular structure.

α-Carbon

The carbon atom adjacent to the functional group in an organic molecule, particularly significant in amino acids and carbonyl compounds.

Amines

Organic compounds and functional groups that contain a basic nitrogen atom with a lone pair, often classified as primary, secondary, or tertiary.

Base

A substance capable of accepting protons according to the Bronsted-Lowry theory or donating electron pairs in Lewis theory; it counteracts acids.