Blue Agave Inc., an S Corporation, had accumulated earnings and profits of $80,000 at the beginning of 2021. Mike and Olivia each own 50% of the stock and have a basis in their stock of $60,000 on January 1, 2021. Blue Agave does not make any distributions during 2021, but had $180,000 of ordinary income. In 2022, the company had $120,000 of ordinary income and made $60,000 in distributions. What is Mike's stock basis on January 1, 2023?
Blue Agave Inc., an S Corporation, had accumulated earnings and profits of $80,000 at the beginning of 2021. Mike and Olivia each own 50% of the stock and have a basis in their stock of $60,000 on January 1, 2021. Blue Agave does not make any distributions during 2021, but had $180,000 of ordinary income. In 2022, the company had $120,000 of ordinary income and made $60,000 in distributions. What is Mike's stock basis on January 1, 2023?
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 37P
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Transcribed Image Text:Blue Agave Inc., an S Corporation, had accumulated
earnings and profits of $80,000 at the beginning of
2021. Mike and Olivia each own 50% of the stock and
have a basis in their stock of $60,000 on January 1,
2021. Blue Agave does not make any distributions
during 2021, but had $180,000 of ordinary income. In
2022, the company had $120,000 of ordinary income
and made $60,000 in distributions.
What is Mike's stock basis on January 1, 2023?
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