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Calculate Basis for Eloise in Three Different Business Forms

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

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Solution Preview

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 ...

Solution Summary

The solution shows the details of the calculations to arrive at basis in a C, an S corporation and a partnership.