Question

suppose that at the beginning of 2023 jamaal's basis in his s corporation stock is $1,000 and he has a $10,000 debt basis associated with a $10,000 loan he made to the s corporation. in 2023, jamaal's share of s corporation income is $4,000, and he received a $7,000 distribution from the s corporation. what is jamaal's stock and debt basis after these transactions?

Answer 1

Jamaal's stock basis is $5,000 and his debt basis is $3,000 after the transactions.

Step-by-step explanation:

To calculate Jamaal's stock and debt basis after the transactions, we need to consider his initial basis and any changes that occurred. Jamaal's initial stock basis is $1,000, and his debt basis is $10,000.

First, we calculate the increase in stock basis by adding his share of S corporation income, which is $4,000. So, the new stock basis is $1,000 + $4,000, which equals $5,000.

Next, we calculate the decrease in the debt basis by subtracting the distribution he received from the S corporation, which is $7,000. So, the new debt basis is $10,000 - $7,000, which equals $3,000.

Therefore, Jamaal's stock basis is $5,000 and his debt basis is $3,000 after these transactions.