Question
On January 1, 2019, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS
On January 1, 2019, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS in return for a promissory note. BLS generated a $600,000 operating loss in 2019. BLS generated $408,000 ordinary business income in 2020.
- Required:How much of Leo's share of this income is included in his 2020 taxable income?
- Compute Leo's basis in his BLS stock and his BLS note at the end of 2020.
- How would your answers to parts a and b change if BLS's ordinary business income was only $220,000?
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Managerial Accounting Decision Making and Performance Management
Authors: Ray Proctor
4th edition
273764489, 978-0273764489
