Beech Corp., an accrual-basis, calendar-year S corporation, has been an S corporation since its inception. At the beginning of the current year, Gold owned 50% of the 100 issued shares of Beech stock, and had a $3,000 tax basis in the Beech stock. During the current year, Beech had $200,000 in net business income and $4,000 in Oak County municipal bond interest income. Beech made no distributions to its shareholders. What was Gold's tax basis in Beech stock at year end?

Gold's tax basis in Beech stock at year end = $105000

Explanation:

given data

net business income = $200,000

municipal bond interest income = $4,000

Gold owned = 50%

tax basis in the Beech stock = $3,000

to find out

What was Gold's tax basis in Beech stock at year end

solution

first we get here total income earned that is express as

total income earned = net business income + municipal bond interest income ... 1

put here value

total income earned = $200000 + $4000

total income earned = $204000

and

gold tax basis total income earn is here

gold tax basis total income earn = 50 % of total income earned

gold tax basis total income earn = $102000

so

Gold's tax basis in Beech stock at year end is

Gold's tax basis in Beech stock at year end = gold tax basis total income earn + tax basis in the Beech stock ... 2

Gold's tax basis in Beech stock at year end = $102000 + $3,000

Gold's tax basis in Beech stock at year end = $105000