1. Jared owns 50% of an S corporation's stock. His basis in the stock was $50,000 on January 1, 2014. On February 1, 2014, the S corporation borrowed $30,000 from Jared, signing a formal note. The S corporation reported an ordinary loss of $150,000 at the end of 2014 and ordinary income of $20,000 at the end of 2015. What are Jared's bases in his stock and his note at the end of both 2014 and 2015?
a. At the end of 2014, his stock basis is zero and note basis is $30,000; at the end of 2015, his stock basis is $10,000 and his note basis is $30,000
b. At the end of 2014, his stock basis is zero and note basis is $5,000; at the end of 2015, his stock basis is zero and his note basis is $15,000
c. At the end of 2014, his stock basis is zero and note basis is $5,000; at the end of 2015, his stock basis is zero and his note basis is $30,000
d. At the end of 2014, his stock basis is zero and note basis is $30,000; at the end of 2015, his stock basis is $10,000 and his note basis is $15,000
2. When a parent acquies control of a subsidiary over time, or in steps, which of the following is false?
All previous values for the investement, prior to the date control is obtained, are remeasured to fair value as of the date of control
If after obtaining control, the parent increases its ownership interest in the subsidiary, no further remeasurement takes place
A prior period adjustment is required to retroactively adjust the consolidated financial statements to as if control was obtained from the initial purchase.
Subsequent years once control is achieved require no special treatment.