Winston Is the Sole Shareholder of Winston Inc, an S

question 35

Multiple Choice

Winston is the sole shareholder of Winston Inc, an S corporation. In 2013, he paid $50,000 for his shares of stock. During the current year, he contributes a building and land to the corporation. No additional shares of stock are issued. The basis of this property is $75,000, and its fair market value is $200,000. What is Winston's basis in his Winston stock at the end of 2014?

• A) $50,000
• B) $75,000
• C) $125,000
• D) $150,000
• E) $225,000

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Definitions:

Materially Participates

In terms of tax law, an individual's active and regular involvement in the operations of a business, affecting eligibility for certain tax deductions.

Passive Activity

Economic activities in which the taxpayer does not materially participate, often producing income subject to special tax rules.

Materially Participate

Involvement in the operations of a business or activity in a regular, continuous, and substantial way, affecting the tax consequences.

AMT Tax Rate

The percentage applied to compute the Alternative Minimum Tax, ensuring that taxpayers pay a minimum amount of tax.