ABC, a Subchapter S corporation, has the following items of income, expense, and gain for its current calendar year. ABC files Form 1120S on a calendar year The figures shown below were prepared by ABC's controller.
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Tax-exempt interest
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$ 4,000
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Ordinary income
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28,000
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Net short-term capital loss
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10,000
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Cash distributions
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35,000
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Additional information :
1. The cash distribution was based on percent ownership.
2. Amold owns 20% of ABC and had a basis at the beginning of the current year of $500.
3. Bradford owns 80% of ABC and had a basis at the beginning of the current year of $6,200.
4. ABC's balances at the beginning of the current year were: AAA, $8,000; AEP, $30,000; and OAA, $1,000.
Required: Calculate the following amounts for the current year (show your work)
a. Balances at the end of the year in AAA, AEP, and OAA.
b. Each shareholder's basis in ABC stock at the end of the current year.
c. Amounts included in AGI by each shareholder for the current year.
d. Answer a through c assuming ordinary income is $1,000 instead of $28,000.