Supposethat at the Beginning of 2020 Jamaal's Basis in His

question 119

Multiple Choice

Supposethat at the beginning of 2020 Jamaal's basis in his S corporation stock is $0, he has a $0 debt basis associated with a $10,000 loan he made to the S corporation, and he has a $5,000 suspended loss from the S corporation. In 2020, Jamaal contributed $8,000 to the S corporation, and the S corporation had ordinary income of $4,000. Assume that Jamaal owns 40 percent of the S corporation. What is Jamaal's stock and debt basis at the end of 2020?

• A)$0 stock basis; $4,600 debt basis
• B)$0 stock basis; $9,600 debt basis
• C)$4,600 stock basis; $0 debt basis
• D)$9,600 stock basis; $0 debt basis
• E)None of the choices are correct.

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Definitions:

Proprietary Fund

A type of fund used in governmental accounting that is used to account for activities similar to those found in the private sector, where the payment of fees by external users for goods or services provided by the fund is the principal source of revenue.

Special Tax Levy

A tax imposed for a specific purpose, often by local or state governments, beyond regular taxing mechanisms.

Environmental Preservation

Actions and policies aimed at protecting the natural environment from degradation and pollution to ensure its health and sustainability for future generations.

Derived Tax Revenue

Income obtained by government authorities through taxation that is influenced or generated from specific business activities or transactions.