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    S Corp Income and Shareholder Basis

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    XYZ Corp.(an S Corp) is owned by Jane and Rebecca who each 50% shareholders. At the beginning of the year, Jane's basis in her XYZ stock was 40,000. XYZ reported the following information for 2010:
    Sales revenue: 730,000, COGS (200,000), Long-term capital gain 8,000, Dividend income 5,000, tax-exempt interest 3,000, salary of owners (120,000), employees wages (50,000), depreciation expense (12,000), miscellaneous exp. (10,000), overall net inc. 354,000

    What amount of ordinary business income is allocated to Jane?
    What is the amount and character of separately stated items allocated to Jane?
    What is Jane's basis in her XYZ corp. stock at the end of the year?

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    Solution Preview

    What amount of ordinary business income is allocated to Jane?

    The business income allocated to Jane is computed as follows:

    Sales revenue $730,000
    Cost of goods sold ( 200,000)
    Salary of owners ( 120,000)
    Employee wages ( ...

    Solution Summary

    This solution discusses how to determine the ordinary income and separately stated items of an S corporation, and how to compute a shareholder's basis.