# Matt and Linda are equal shareholders in ML Corporation, an S corporation. The corporation, Matt,

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Matt and Linda are equal shareholders in ML Corporation, an S corporation. The corporation, Matt, and Linda are calendar year taxpayers. The corporation has been an S corporation during its entire existence and thus has no accumulated E&P. The shareholders have no loans to the corporation. The corporation incurred the following items in the current year:

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Requirements

a.
Compute the S corporation's ordinary income and separately stated items.
b.
Show Matt's and Linda's shares of the items in Part a.
c.
Compute Matt's and Linda's ending stock bases assuming their beginning balances are \$75,000

each. When making basis adjustments, apply the adjustments in order according to Sec. 1367(a).
Requirement a. Compute the S corporation's ordinary income and separately stated items.

Begin by computing the S corporation's ordinary income.

Sales

Minus:

Gross profit

Plus:

Minus: Ordinary expenses

S corporation ordinary income

Select the S corporation's separately stated items. (Use parentheses or a minus sign for loss or expense amounts. Abbreviation used: M and E = meals and entertainment.)

Requirement b. Show

Matt's and Linda's

shares of the items in Part a.

Matt's share of the S corporation's ordinary income is
\$

and Linda's share of the S corporation's ordinary
income is
\$

. The separately stated items are

Requirement c. Compute Matt's and LindaLinda's ending stock bases assuming their beginning balances are \$75,000 each. Begin by entering the beginning basis for each shareholder. Determine the items and amounts which increase each shareholder's basis, then the items and amounts which decrease each shareholder's basis. Finally, compute each shareholder's ending basis. (Use parentheses or a minus sign for loss or expense amounts.)

Matt
Linda
Beginning basis in S corporation interest

Plus:

Minus:

Ending basis in S corporation interest