Assume Jack and Jill, 25 and 75 percent shareholders, respectively, in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively. Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1? UpAHill Corporation (an S corporation) Income Statement December 31, Year 1 and Year 2 Year 1 Year 2 Sales revenue $175,000 $310,000 Cost of goods sold (60,000) (85,000) Salary to owners Jack and Jill (40,000) (50,000) Employee wages (15,000) (20,000) Depreciation expense (10,000) (15,000) Miscellaneous expenses (7,500) (9,000) Interest income (related to business) 2,000 2,500 Qualified dividend income 500 1,000 Overall net income $45,000 $134,500 Tax Basis Jack Jill
Assume Jack and Jill, 25 and 75 percent shareholders, respectively, in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively. Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1? UpAHill Corporation (an S corporation) Income Statement December 31, Year 1 and Year 2 Year 1 Year 2 Sales revenue $175,000 $310,000 Cost of goods sold (60,000) (85,000) Salary to owners Jack and Jill (40,000) (50,000) Employee wages (15,000) (20,000) Depreciation expense (10,000) (15,000) Miscellaneous expenses (7,500) (9,000) Interest income (related to business) 2,000 2,500 Qualified dividend income 500 1,000 Overall net income $45,000 $134,500 Tax Basis Jack Jill
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume Jack and Jill, 25 and 75 percent shareholders, respectively, in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively. Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?
| UpAHill Corporation (an S corporation) | |||||||
| Income Statement | |||||||
| December 31, Year 1 and Year 2 | |||||||
| Year 1 | Year 2 | ||||||
| Sales revenue | $175,000 | $310,000 | |||||
| Cost of goods sold | (60,000) |
(85,000) | |||||
| Salary to owners Jack and Jill | (40,000) | (50,000) | |||||
| Employee wages | (15,000) | (20,000) | |||||
| (10,000) | (15,000) | ||||||
| Miscellaneous expenses | (7,500) | (9,000) | |||||
| Interest income (related to business) | 2,000 | 2,500 | |||||
| Qualified dividend income | 500 | 1,000 | |||||
| Overall net income | $45,000 | $134,500 | |||||
|
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