Question
For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate
For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omnioculars S election, effective August 1, 2016.
In 2016, Omniocular reported the following income/expense items:
Jan 1Jul 31 2016 (213 days) | Aug 1Dec 31, 2016 (153 days) | Jan 1Dec 31, 2016 | |
Sales Revenue | $ 80,000 | $ 185,000 | $ 265,000 |
Cost of Goods Sold | (40,000) | (20,000) | (60,000) |
Salaries to Barry and Winnie | (60,000) | (40,000) | (100,000) |
Depreciation Expense | (7,000) | (2,000) | (9,000) |
Miscellaneous Expense | (4,000) | (3,000) | (7,000) |
Interest Income | 6,000 | 5,250 | 11,250 |
Overall Net Income (Loss) | (25,000) | 125,250 | 100,250 |
Assume use of the daily method and that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barrys stock basis in his Omniocular stock on January 1, 2016, is $50,000, what is his stock basis on December 31, 2016?
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