XYZ Corporation (An S Corporation) Is Owned by Jane and Rebecca

question 31

Essay

XYZ Corporation (an S corporation) is owned by Jane and Rebecca who are each 50% shareholders. At the beginning of the year, Jane's basis in her XYZ stock was $40,000. XYZ reported the following tax information for 2014. $$\begin{array} { | l | r | } \hline \text { Description } & { \text { Amount } } \\\hline \text { Sales revenue } & \$ 730,000 \\\hline \text { Cost of goods sold } & ( 200,000 ) \\\hline \text { Long-term capital gain } & 8,000 \\\hline \text { Dividend income } & 5,000 \\\hline \text { Tax exempt interest } & 3,000 \\\hline \text { Salary to owners } & ( 120,000 ) \\\hline \text { Employee wages } & ( 50,000 ) \\\hline \text { Depreciation expense } & ( 12,000 ) \\\hline \text { Miscellaneous expenses } & ( 10,000 ) \\\hline \text { Overall net income } & \$ 354,000 \\\hline\end{array}$$ Required:
a. What amount of ordinary business income is allocated to Jane?
b. What is the amount and character of separately stated items allocated to Jane?
c. What is Jane's basis in her XYZ corp. stock at the end of the year?

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Definitions:

Capital

Wealth in the form of money or assets, used or available for use in the production of more wealth.

Accounting Profit

The total revenue of a business minus its explicit costs; does not include opportunity costs.

Home-Organization

The process of organizing and arranging the living space within a home for better functionality and aesthetics.

Farming

The activity or business of growing crops and raising livestock for food, fiber, and other products.