Bev and Cabel Each Own One-Half of the Stock of Finch

question 92

Multiple Choice

Bev and Cabel each own one-half of the stock of Finch, Inc., an S corporation with no accumulated E & P.Bev's basis in the Finch stock is $225,000.Finch's taxable income for the current year is $100,000, and it distributes $180,000 to each shareholder.Bev's stock basis at the end of the year is:

• A)$0.
• B)$45,000.
• C)$95,000.
• D)$100,000.

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Definitions:

Denominator

The bottom number in a fraction that shows the total number of equal parts the whole is divided into.

Quick Ratio

A financial ratio that measures a company’s “instant” debt-paying ability, computed as quick assets divided by current liabilities.

Account Payable

The liability created by a purchase on account.

Solvency Analysis

An assessment of a company's ability to meet its long-term financial obligations.