Question

a U.S. Citizen, is a sole shareholder of S corporation. He has $5,000 basis in stock....

a U.S. Citizen, is a sole shareholder of S corporation. He has $5,000 basis in stock. also loaned money to S Corporation and has basis of $3,000. Assume no AEP, calendar year and beginning balance of AAA and OAA accounts are zero. The corp. made $10,000 in the ordinary income which was reported on K-1. Corp. also received a tax- free interest income of $4,000 which was also reported on K-1. Ryan took a distribution of $21,000 during the year from the S corporation. Please calculate the year-end balances in AAA account, OAA Account, stock basis and loan basis showing the effects of the distribution. Please show your calculations.

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Answer #1
Closing AAA :
Particulars Amount($)
Opening 0
Ordinary Income 10000
10000
Less: Distributions -10000
Closing 0

Closing Stock basis:
Particulars Amount($)
Opening 5000
Ordinary Income 10000
Interest 4000
Total 19000
Distributions -19000
Closing 0

Closing Loan Basis:
Particulars Amount($)
Opening 3000
Distributions -2000
Closing 1000

Note:

1. Non Separately Stated income i.e. ordinary income will be added in the AAA and Interest income which is exempt shall not form part of AAA but will be included in Stock Basis of Ryan

2. Amount distributed in excess of balance of AAA will be reduced from Stock basis and thereafter from Loan Basis

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