Gene Grams is a 45% owner of a calendar year S corporation during
2002. His beginning stock basis is $230,000, and the S corporation
reports the following items:

Ordinary income               $64,000
Short-term capital gain        16,000
Code Section 1231 loss          6,000
Tax-exempt interest income      5,000

Calculate Grams' stock basis at year-end.

Note:  We are talking about USA

Hi Alpa_Sanjay

Looks to me as if the answer is $265,550

Add all the items together - 64 + 16 + 5 - 6 = $79,000
Multiply by 45% = $ 35,550 
add that to the   $230,000 
                  _________
Total             $265,550

There are apparently two tricks to the question:

1) The tax-exempt interest - it does increase basis
2) Don't forget he's only a 45% owner, not 100%

Best wishes,

Your TaxMama-ga