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On January 1, Year 1, Ginger, an individual, paid $23,000 for 6 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $11,000 to Root Corp. in return for a promissory note. Root Corp. generated a $680,000 operating loss in Year 1. Root Corp. generated $416,000 ordinary business income in Year 2. Required: a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. c. How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Complete this question by entering your answers in the tabs below. Req A and B Req C How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Taxable income Amount $ 6,880 Adjusted basis Root Stock $ 0 Root Note $ 0 < Req A and B Req C >

On January 1, Year 1, Ginger, an individual, paid $23,000 for 6 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $11,000 to Root Corp. in return for a promissory note. Root Corp. generated a $680,000 operating loss in Year 1. Root Corp. generated $416,000 ordinary business income in Year 2. Required: a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. c. How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Complete this question by entering your answers in the tabs below. Req A and B Req C How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Taxable income Amount $ 6,880 Adjusted basis Root Stock $ 0 Root Note $ 0 < Req A and B Req C >

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, Year 1, Ginger, an individual, paid $23,000 for 6 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $11,000 to Root Corp. in return for a promissory note. Root Corp. generated a $680,000 operating loss in Year 1. Root Corp. generated $416,000 ordinary business income in Year 2. Required: a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. c. How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Complete this question by entering your answers in the tabs below. Req A and B Req C How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Amount Taxable income $ 6,880 Adjusted basis Root Stock $ 0 Root Note $ 0 < Req A and B Req C >
Transcribed Image Text:On January 1, Year 1, Ginger, an individual, paid $23,000 for 6 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $11,000 to Root Corp. in return for a promissory note. Root Corp. generated a $680,000 operating loss in Year 1. Root Corp. generated $416,000 ordinary business income in Year 2. Required: a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. c. How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Complete this question by entering your answers in the tabs below. Req A and B Req C How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $228,000? Amount Taxable income $ 6,880 Adjusted basis Root Stock $ 0 Root Note $ 0 < Req A and B Req C >
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