Suppose at the Beginning of 2018, Jamaal's Basis in His

question 105

Multiple Choice

Suppose at the beginning of 2018, Jamaal's basis in his S corporation stock is $1,000, and he has a $10,000 debt basis associated with a $10,000 loan he made to the S corporation. In 2018, Jamaal's share of S corporation income is $4,000, and he received a $7,000 distribution from the S corporation. What is Jamaal's stock and debt basis after these transactions?

• A) $0 stock basis; $8,000 debt basis.
• B) $0 stock basis; $10,000 debt basis.
• C) $5,000 stock basis; $10,000 debt basis.
• D) $5,000 stock basis; $3,000 debt basis.
• E) None of the choices are correct.

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Definitions:

365-Day Year

A calendar year consisting of 365 days, not accounting for leap years which have 366 days.

Total Amount

The full sum resulting from the addition of all parts, quantities, or figures.

Exact Interest

A method of calculating interest using a 365-day year or actual number of days in a loan's term, leading to a more precise interest calculation.

365-Day Year

A calendar year used for financial calculations, representing the actual number of days in most years.