Suppose at the Beginning of 2017, Jamaal's Basis in His

question 114

Multiple Choice

Suppose at the beginning of 2017, Jamaal's basis in his S corporation stock is $1,000, and he has a $10,000 debt basis associated with a $10,000 loan he made to the Scorporation. In 2017, Jamaal's share of S corporation income is $4,000, and he received a$7,000 distribution from the S corporation. What is Jamaal's stock and debt basis after these transactions?

• A) $0 stock basis; $10,000 debt basis.
• B) $0 stock basis; $8,000 debt basis.
• C) $5,000 stock basis; $3,000 debt basis.
• D) $5,000 stock basis; $10,000 debt basis.
• E) None of the choices are correct.

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Definitions:

Bond Payable

A long-term debt instrument issued by corporations or governments, obliging the issuer to pay back the principal along with interest at a specified future date.

Financing Activities

Actions leading to alterations in the magnitude and structure of a corporation's equity and debt.

Statement of Cash Flows

An accounting summary that shows the overall cash received by a business from its operational activities and investment income, and the cash expended on its business processes and investment opportunities during a set period.

Cash Payment

The process of settling a debt or completing a purchase with the exchange of physical money or through electronic funds.