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

 

 

 

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?