The Madison Restaurant was formed a S corporation at the end of last year. Bob Buron, owns 60% of the stock, manages the restaurant. Ray Huges owns the remaining 40% of the stock. Mr. Buron contributed $30,000 of cash and services worth $35,000 to start the S corporation. Mr. Huges contributed property with a cost to him of $50,000 and a fair market value of $75,000 to also start the S Corp. Below are pertinent facts for the current year: Cost of Goods Sold 460,000 Charitable Contributions 8,000 Depreciation 25,000 Sales 980,000 Long Term Capital Gain 12,000 Repairs and Maintenance 10,000 Distribution to Mr. Buron 66,000 Section 1231 gain 8,500 Dividends received 1,500 Distribution to Mr. Huges 44,000 Salary to Mr. Buron 70,000 Municipal Bond Interest Received 1,000 Short Term Capital Loss 7,000 Other Salaries 235,000
1. Calculate (and show computations) of the S Corporation''s ordinary taxable income:
2. List which items are separately stated for the S Corporation.
3. What is Mr. Burton's stock Basis at the end of the year? (show computations)
4. What is Mr. Hughes Stock basis at the end of the year? (show computations)
5. If the S Corporation has an ordinary loss for the next year of $250,000, how much can Mr. Hughes deduct? (show computations)