Question

Rayburn owns all the shares of Newcastle Corporation, which operates as an S corporation. Rayburn's basis in the stock is $15,000. During the year, he receives a cash distribution of $22,000 from Newcastle. What must Rayburn and Newcastle report as income from the cash distribution?

Answer 1

$7,000 $-0-

Step-by-step explanation:

For Rayburn to know what to record from the cash distribution, he will need to subtract his basis in the stock from the cash distribution he receives

Therefore $22 000 - $15 000 = $7 000.

And Newcastle has no income =$-0-