Shareholder A is the sole shareholder in S Corporation, an S Corporation. On Jan

Question

Shareholder A is the sole shareholder in S Corporation, an S Corporation. On January 1 of the tax year specified for the exam, A's basis is $70,000. During that same year, the corporation has non-separately stated income of $30,000. A 1231 gain in the first half of the year of $3,000 and a charitable contribution in the second half of the year of $2,000. On July 1, of the same year, A sells his stock to B for $150,000.

a. A's gain is $80,000.

b. A's gain is $45,000.

C. A's gain is $62,000.

d. A's gain is $64,500

e. None of the above.

EXPLAIN

Explanation / Answer

Answer is : A's gain of $ 80,000. ($150,000-$70,000)

Non-seperated stated income of corporation will not be added while calculating basis of the stock at the time of sale.

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