Mike and Nancy are equal shareholders in MN Corporation, an S corporation. The corporation, Mike, and Nancy 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:

a. Compute the S corporation€™s ordinary income and separately stated items.
b. Show Mike€™s and Nancy€™s shares of the items in Part a.
c. Compute Mike€™s and Nancy€™s ending stock bases assuming their beginning balances are $100,000 each.

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Sales Cost of goods sold Dividends on corporate investments Tax-exempt interest income Sec. 1245 gain (recapture) on equipment sale Sec 1231 gain on equipment sale Long-term capital gain on stock sale Long-term capital loss on stock sale Short-term capital loss on stock sale Depreciation Salary to Nancy 5300,000 140,000 10,000 3,000 22,000 12,000 8,000 7,000 6,000 18,000 20,000 Meals and entertainment expenses 7,800 Interest expense on loans alloc able to Business debt 32,000 Stock investments 6,400 Tax-exempt bonds 1,800 Principal payment on business I oan 9,000 Charitable contributions 2,000 Distributions to shareholders (S15,000 each) 30,000