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While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company,
While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat GTE specializes in customsculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of and each contributed $ in exchange for a percent ownership interest. GTE also borrowed $ from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's activities:
GTE uses the cash method of accounting for both book and tax purposes and reports income on a calendaryear basis.
GTE received $ of sales revenue and reported $ of cost of goods sold it did not have any ending inventory
GTE paid $ compensation to James, $ compensation to Paul, and $ of compensation to other employees assume these amounts include applicable payroll taxes, if any
GTE paid $ of rent for a building and equipment, $ for advertising, $ in interest expense, $ for utilities, and $ for supplies.
GTE contributed $ to charity.
GTE received a $ qualified dividend from a great stock investment it owned percent of the corporation distributing the dividend and it recognized $ in shortterm capital gain when it sold some of the stock.
On December GTE distributed $ to James and $ to Paul.
GTE has qualified property of $unadjusted basis
Note: Leave no answers blank. Enter zero if applicable. Enter NA if not applicable.
a Assume James and Paul formed GTE as an S corporation.
Compute the tax basis of Paul's stock in GTE at the end of
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