Adjusted Basis LO 3 Troy owns 600 of the 1000 outstanding sh

Adjusted Basis (LO. 3) Troy owns 600 of the 1,000 outstanding shares of Oiler Corporation. His adjusted basis in the Oiler stock at the beginning of the current year is $88,000. Oiler Corporation is organized as an S corporation and reports the following results for the current year: Operating income before special items Charitable contributions Nondeductible expenses Cash dividends paid $58,000 8,000 9,000 22,000 a. Troy\'s adjusted basis in the Oiler Corporation stock at the end of the current year is s b. If Troy sells the 600 shares for $100,000 to an unrelated person at the beginning of next year then Troy realizes a ofs gain loss

Solution

SOLUTION A:- beginning of the current year= $88000

add: operating income before special items : 58000

add: cash dividends paid=22000

less:charitable contributions:8000

less: non deductible expenses=9000

adjusted basis at the end of year=151000

B:-cost of 600 shares = (151000/1000)*600=90600

selling price= 100000

gain= 100000-90600=$9400