Suppose at the Beginning of 2014, Jamaal's Basis in His

question 79

Multiple Choice

Suppose at the beginning of 2014, 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 S corporation. In 2014, 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; $8,000 debt basis.
• B) $0 stock basis; $10,000 debt basis.
• C) $5,000 stock basis; $10,000 debt basis.
• D) $5,000 stock basis; $3,000 debt basis.
• E) None of these.

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Definitions:

Managers

An advocate for stability and the status quo.

Conception of the World

An individual or collective understanding and interpretation of the world around us, including beliefs about nature, society, and the universe.

Satisfice

To select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize.

Bounded Rationality

A concept suggesting that individuals make decisions based on the limited information available to them and within the constraints of their cognitive capacity.