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

question 35

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:

Society

A group of individuals sharing a common territory and culture, and who interact and create relationships that form a distinct entity with shared norms and values.

Social Control Theory

A theory in sociology that suggests mechanisms, strategies, and processes that regulate individual and group behavior, leading to conformity and compliance to the rules of a society.

Social Norms

Expected standards of conduct within a society that guide the behavior of its members.

Internalize

The process of incorporating the values, attitudes, and norms of a society into one's own belief system.