Robert Elk Paid $100,000 for All of the Single Class

question 32

Essay

Robert Elk paid $100,000 for all of the single class of stock of Elkom Corporation,an electing S corporation,when incorporated in January,2007.Elkom's operating results and dividend distribution are as follows:
What is Elk's basis for his Elkom stock on December 31 of 2007?

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Definitions:

Total Assets

The sum of all resources owned by an entity that are recognized as having economic value.

Net Income

The total profit of a business after all expenses and taxes have been deducted from total revenue.

Internal Growth Rate

The maximum rate at which a company can expand using only its own sources of funding without resorting to external financial options.

Constant Percentage

A fixed percentage rate applied to various mathematical and financial calculations.