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On January 1 of this year, Conrad Nelson contributed $15,000 cash in exchange for 50 shares of stock in Sterling Inc., an S corporation. Sterling employs Conrad as its director of marketing. Conrad's current year salary was $70,000 and his pro rata share of Sterling's ordinary business income was $16,800. During the year, Conrad received a $9,000 cash distribution with respect to his Sterling stock. Compute Conrad's basis in his Sterling stock at year end. Multiple Choice $15,000 $22,800 $31,800 $92,800

Sagot :

Tundexi

Answer:

b. $22,800

Explanation:

Particulars                                                                                Amount

Contribution                                                                             $15,000

Ordinary business income share                                           $16,800

Cash Distribution                                                                     $(9,000)

Conrad’s basis in his Sterling stock on January 1, 2013   $22,800

abiolataiwo2015

Conrad's basis in his Sterling stock at year end is $22,800.

Using this formula

Conrad’s basis in his Sterling stock =Contribution +  Conrad’s basis in his Sterling stock - Cash distribution

Let plug in the formula

Conrad’s basis in his Sterling stock =$15,000+$16,800-$9,000

Conrad’s basis in his Sterling stock = $22,800

Inconclusion Conrad's basis in his Sterling stock at year end is $22,800.

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