An S Corporation, with No AEP, Has Net Ordinary Income

question 29

Multiple Choice

An S corporation, with no AEP, has net ordinary income from sales of its products of $12,000.The only distribution of profits during the year to L, its sole owner, is land with a market value of $3,000 and a basis of $2,000.L will hold the land as an investment.At the beginning of the year, L's basis in the corporation's stock was $7,500.L's basis in the stock, after all items are considered, is

• A)$7,500
• B)$16,500
• C)$17,500
• D)$19,500

---

Definitions:

Economic Losses

Refers to the situation where total costs exceed total revenues, leading to a negative net income for a business.

Marginal Cost

The growth in overall costs resulting from the manufacture of one more unit of a good or service.

Economic Losses

Situations where total costs exceed total revenues, indicating that resources may be better utilized elsewhere.

Average Variable Cost

The total variable costs (costs that change with the level of output) of production divided by the quantity of output produced.