Shelley Owns a 25% Interest in a Qualifying S Corporation

question 41

Essay

Shelley owns a 25% interest in a qualifying S corporation.Shelley's basis in the stock was $15,000 at the beginning of the year.Shelley made no capital contributions and received no distributions during the year.Shelley loaned the S corporation $20,000 this year.The S corporation incurred a $160,000 ordinary loss this year.
a.What are the amounts of Shelley's deduction and carryover of the unused loss for the year?
b.What is the amount of Shelley's basis in the stock at the end of year one?
c.If the S Corporation earned net income of $200,000 in year two,what is the amount of Shelley's stock basis at the end of year two?

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Definitions:

Probability Distribution

A function in mathematics that calculates the chances of various outcomes happening in an experiment.

E(x)

The expected value of a random variable, representing the mean or average value the variable takes over a large number of experiments or trials.

Project Life Cycle

The series of phases that a project goes through from its inception to its closure, typically including initiation, planning, execution, monitoring, and closing.

Execution

The phase in project management where plans are put into action to create the project's deliverables, adhering to agreed specifications and timelines.