Eloise contributes $40,000 to a business entity in exchange for a 30% ownership interest. During the first year of operations, the entity earns a profit of $200,000, and at the end of the year, it has liabilities of $75,000. Calculate Eloise's basis for her ownership interest if the entity is:
- a C Corporation
- an S corporation
- a partnership
C Corporation: Eloise invests $40,000 in stock of the C Corporation. Her basis continues at $40,000 until she sells or the corporation liquidates.
S Corporation: Eloise ...
The solution shows the details of the calculations to arrive at basis in a C, an S corporation and a partnership.