Wanda is a 20 percent owner of Video Associates, which is treated as a passthrough entity for federal income tax purposes. Wanda's tax basis in her investment in Video Associates was $30,000 at the beginning of the current year. This year, Wanda was allocated $45,000 of ordinary income from Video Associates, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Wanda also received a $10,000 distribution from Video Associates this year. At the beginning of the year, Video Associates had outstanding debt of $100,000. At the end of the year, the entity's outstanding debts increased to $130,000. a. If Video Associates is a partnership, determine Wanda's tax basis in her partnership interest at year end. b. If Video Associates is an S corporation, determine Wanda's tax basis in her corporate stock at year end.
Wanda is a 20 percent owner of Video Associates, which is treated as a passthrough entity for federal income tax purposes. Wanda's tax basis in her investment in Video Associates was $30,000 at the beginning of the current year. This year, Wanda was allocated $45,000 of ordinary income from Video Associates, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Wanda also received a $10,000 distribution from Video Associates this year. At the beginning of the year, Video Associates had outstanding debt of $100,000. At the end of the year, the entity's outstanding debts increased to $130,000.
a. If Video Associates is a
b. If Video Associates is an S corporation, determine Wanda's tax basis in her corporate stock at year end.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
