During the current year, Thrasher (a calendar year, accrual basis S corporation) records the following...
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Accounting
During the current year, Thrasher (a calendar year, accrual basis S corporation) records the following transactions.
Sales $1,500,000 Cost of goods sold $900,000 Long-term capital gain $11,000 Short-term capital gain $5,000 Salaries $210,000 Qualified dividends from stock investments $30,000 Rent expense $170,000 Advertising expense $20,000 Interest expense on business loan $15,000 Section 1231 gain $25,000 Organizational expenditures $3,000 Charitable contributions $5,000 Bad debt (trade account receivable deemed to be uncollectible) $10,000 Cash dividend distributed to shareholders $120,000
Required:
Kirby Turner is a 20% shareholder in Thrasher Corporation. She is aware of the tax consequences of the various items listed on the Schedule K1 (Form 1120S) she received but does not understand their effect on basis. She is considering selling her stock and wants to estimate the gain or loss that will result. Determine or summarize the changes to stock basis that the current-year transactions caused.
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