Stephanie Owns a 25% Interest in a Qualifying S Corporation

question 69

Multiple Choice

Stephanie owns a 25% interest in a qualifying S corporation.Stephanie's basis in the stock was $40,000 at the end of the year after adjustments are made for capital contributions and distributions (but not operating results) .Stephanie also loaned the S corporation $10,000 this year.The S corporation incurred a $240,000 ordinary loss this year.Assume that next year the S corporation's ordinary income is $160,000.Stephanie's basis in her stock at the end of next year is

• A)$10,000.
• B)$20,000.
• C)$30,000.
• D)$40,000.

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Definitions:

Instinctive Drift

The inclination of an animal to return to innate behaviors that disrupt a learned response.

Sensory Adaptation

The adaptation process of sensory receptors becoming duller in response to stimuli that stays the same over time.

Stimulus Generalization

The process by which a response originally elicited by a specific stimulus is elicited by similar stimuli.

Spontaneous Recovery

The reappearance of a previously extinguished response after a period of no exposure to the conditioned stimulus.