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Assume Jack and Jill, 25 and 75 percent shareholders in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively.
UpAHill Corporation (an S Corporation)
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Income Statement
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December 31, year 1 and year 2
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Year 1
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Year 2
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Sales revenue
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$
|
175,000
|
$
|
310,000
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Cost of goods sold
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(60,000
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)
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(85,000
|
)
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Salary to owners Jack and Jill
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(40,000
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)
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(50,000
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)
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Employee wages
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(15,000
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)
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(20,000
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)
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Depreciation expense
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(10,000
|
)
|
(15,000
|
)
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Miscellaneous expenses
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(7,500
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)
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(9,000
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)
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Interest income
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2,000
|
2,500
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Dividend income
|
500
|
1,000
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Overall net income
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$
|
45,000
|
$
|
134,500
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1) Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?
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