I:17-57 Basis of S Corporation Stock. Cathy is a 40% shareholder of City Corporation. City is a calendar year S corporation. Cathy acquired her stock on January 1 of the current year for

$80,000. In the current year, City reports the following results of operations, cash distributions, and salary payments:

Ordinary income allocable to Cathy $30,000 Salary payments to Cathy 40,000 Long-term capital loss allocable to Cathy 5,000 Cash distributions to Cathy 17,000

a. What is Cathy’s stock basis at the end of the current year?

b. What amounts should Cathy include in her individual tax return for the current year?

Will the salary Cathy pays to herself affect her qualified business income deduction?