Question

Maria is a sole shareholder in Austin Corporation, an S corporation. At the beginning of last year, her basis in her Austin stock was $215,000. Austin also had debt of $50,000 it owed to unrelated parties. During last year she loaned Austin $150,000, and it generated a loss of $240,000. What was her basis in the stock and the loan at the end of last year? Assume the facts above. Suppose that in the current year the income of Austin is $140,000. What would be Maria’s basis in the stock and the loan at the end of the current year?

Answer 1

1) Maria's Basis in Austin stock

Balance of basis in the beginning of the year = $ 2,15,000
(-) Loss during the year ($ 240,000)
Balance of stock basis in the end of Last year = ($ 25,000)

Maria's Basis in Loan

Balance of basis in the beginning of the year = 0
(+) Loan provided during the year + $ 150,000
Balance of loan basis in the end of Last year = $ 1,50,000

2) In the current year the income of Austin is $140,000

Maria's Basis in Austin stock

Balance of basis in the beginning of the year = $ 2,15,000
(+) Gain during the year $ 140,000
Balance of stock basis in the end of Last year = $ 3,55,000

Maria's Basis in Loan

Balance of basis in the beginning of the year = 0
(+) Loan provided during the year + $ 150,000
Balance of loan basis in the end of Last year = $ 1,50,000