Tonya Is the 100% Shareholder of a Corporation Established Five

question 40

Multiple Choice

Tonya is the 100% shareholder of a corporation established five years ago.It has always been an S corporation.After adjustment for this year's corporate income,but before taking distributions into account,Tonya has a $50,000 stock basis.The corporation pays Tonya a $60,000 cash distribution.As a result of this distribution,Tonya will have an ending stock basis and recognized income of

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Definitions:

Convertible Bonds

Bonds issued by a corporation that can be converted into a predetermined number of shares of the company's stock at the discretion of the bondholder, usually at certain times during their life.

Stock Options

Contracts that give the holder the right, but not the obligation, to buy or sell a specified amount of stock at a predetermined price within a set time period.

Convertible Preferred Stock

A type of preferred stock that offers the holder the option to convert their shares into a predetermined number of common stock shares, usually after a specific date.

Treasury Stock

Shares that were issued and then reacquired by the issuing company, reducing the amount of outstanding stock.