Q 1.

During 2017, DL, Inc., an S corporation for the whole year, earned the following income and loss items: ordinary income of $175,000; short-term capital gain of $94,000; long-term capital loss of ($91,000); tax-exempt income of $22,000; and made a charitable contribution of $18,000. At the end of the year, Diego Luis owned 50% of the stock of DL, Inc. Diego bought his shares from another shareholder on October 1, 2017. How much of each item will Diego include in his 2017 personal income tax return related to the items from DL, Inc.?

	Ordinary Income	ST Capital Gain	LT Capital Loss	Tax-exempt income	Charitable contribution
a.	87,500	47,000	(45,500)	11,000	9,000
b.	43,750	23,500	(22,750)	5,500	4,500
c.	21,875	11,750	(11,375)	2,750	2,250
d.	21,875	375	0	5,500	4,500

Q 2.

Transferor	Item	FMV	Basis
Mikey	Building	500,000	240,000
Mikey	Office Equipment	25,000	12,000
Pam	Office Equipment	75,000	40,000
Pam	Advertising Services	40,000	0
Ryan	Patent	100,000	0

1. What will be the basis for each of the shareholders in their stock of MPR, Inc.? The answers are in order of Mikey, Pam and Ryan.

1. 525,000; 75,000 and 100,000
2. 525,000; 115,000 and 100,000
3. 252,000; 80,000 and 100,000
4. 252,000; 80,000; and 0