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Shelby is a shareholder in GrizzlyCo, a calendar year S corporation
Shelby is a shareholder in GrizzlyCo, a calendar year S corporation. At the beginning of the year, her stock basis is $55,000, her share of the AAA is $19,000, and her share of corporate AEP is $42,000.
At the end of the year, Shelby receives from GrizzlyCo a $26,000 cash distribution. Shelby's share of S corporation items includes a $20,000 long-term capital gain and a $56,000 ordinary loss.
Determine the effects of these events on Shelby's share of the entity's AAA, her stock basis, and GrizzlyCo's AEP.
Expert Solution
| The effects of events on Mary's share of the entity's AAA, her stock basis, and CarrollCo's AEP: | |||
| AAA | Stock basis | AEP | |
| Beginning balance | $19,000 | $55,000 | $42,000 |
| Distribution | $19,000 | $19,000 | $38,000 |
| Balance | $0 | $36,000 | $4,000 |
| Long term capital gains | $20,000 | $20,000 | $0 |
| Balance | $20,000 | $56,000 | $4,000 |
| Loss | $56,000 | $56,000 | $0 |
| Ending balance | ($36,000) | $0 | $4,000 |
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