Dudley has a 20% ownership interest in a business for which his basis is $100,000. During the year, the entity earns profits of $90,000 and makes cash distributions to the owners of $50,000. How do these transactions affect Dudley's basis if:
a. The entity is a C corporation?
b. The entity is a general partnership?
c. The entity is an S corporation.

Question

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The Answer of Dudley has a 20% ownership interest in a business for which his basis is $100,000. During the year, the entity earns profits of $90,000 and makes cash distributions to the owners of $50,000. How do these transactions affect Dudley's basis if:
a. The entity is a C corporation?
b. The entity is a general partnership?
c. The entity is an S corporation.

Dudley Has a 20% Ownership Interest in a Business for Which