Question
On January 1, 2020, Leo paid $24,000 for 7 percent of the stock in BLS, an S corporation. In November, he loaned $12,000 to BLS
On January 1, 2020, Leo paid $24,000 for 7 percent of the stock in BLS, an S corporation. In November, he loaned $12,000 to BLS in return for a promissory note. BLS generated a $790,000 operating loss in 2019. BLS generated $417,000 ordinary business income in 2021.
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 $239,000?
Step by Step Solution
3.34 Rating (151 Votes )
There are 3 Steps involved in it
Step: 1
Year a Basis Calculation 2020 Initial Basis 24000 Add Income Items A...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0073379616, 73379611, 978-0697789938
