Mike and Nancy are equal shareholders in MN Corporation, an S-corporation. The corporation, Mike, and Nancy are calendar year taxpayers. The corporation has been an S-corporation during its entire existence and, as a result, has no accumulated E and P. The shareholders have no loans to the corporation. The corporation incurred the following items in the current year:

1. Compute the S-corporations ordinary income and list the separately stated items.

2. Show Mikes and Nancys shares of the items in question 1.

3. Compute Mikes and Nancys ending stock bases, assuming their beginning balances are $100,000 each

Sales Cost of goods sold Dividends on corporate investments Tax-exempt interest income Sec. 1245 gain (recapture) on equipment sale Sec. 1231 gain on equipment sale Long-term capital gain on stock sale Long-term capital loss on stock sale Short-term capital loss on stock sale Depreciation Salary to Nancy Meals and entertainment expenses Interest expense on loans allocable to: Business debt Stock investments

$300,000 $140,000 $10,000 $3,000 $22,000 $12,000 $8,000 $7,000 $6,000 $18,000 $20,000 $7,800 $32,000 $6,400

Tax-exempt bonds Principal payment on business loan Charitable contributions Distributions to shareholders ($15,000 each)

$1,800 $9,000 $2,000 $30,000