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Assume Jack and Jill, 25 and 75 percent shareholders in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of
Assume Jack and Jill, 25 and 75 percent shareholders in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively.
UpAHill Corporation (an S Corporation) | |||||||
Income Statement | |||||||
December 31, year 1 and year 2 | |||||||
Year 1 | Year 2 | ||||||
Sales revenue | $ | 175,000 | $ | 310,000 | |||
Cost of goods sold | (60,000 | ) | (85,000 | ) | |||
Salary to owners Jack and Jill | (40,000 | ) | (50,000 | ) | |||
Employee wages | (15,000 | ) | (20,000 | ) | |||
Depreciation expense | (10,000 | ) | (15,000 | ) | |||
Miscellaneous expenses | (7,500 | ) | (9,000 | ) | |||
Interest income | 2,000 | 2,500 | |||||
Dividend income | 500 | 1,000 | |||||
Overall net income | $ | 45,000 | $ | 134,500 | |||
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Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?
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