Question 1. Robert Elk paid $100,000 for all of the single class of stock of Elkom Corporation, an electing S corporation, when incorporated in January Year 1. Elkom's operating results and dividend distribution are as follows:

Tax Year Ending	Ordinary income	Distribution
Year 1	($40,000)
Year 2	60,000	$20,000 (9/30)
Year 3	$30,000

What is Elk's basis for his Elkom stock on December 31 of 2019?

Question 2. Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows:

Assets	Basis	Fair Market Value
Cash	$80,000	$80,000
U11 Realized receivables	0	72,000
Inventory	80,000	184,000
Land	80,000	64,000
Total	$240,000	$400,000

The partnership has no liabilities on the sale date. Tony's basis in his partnership interest on the date of the sale is $60,000. What is the amount of gain realized by Tony on the sale of his partnership interest?

Question 3. The HMS Partnership, a cash method of accounting entity, has the following balance sheet at December 31 of last year:

Assets	Basis	Fair Market Value
Cash	$51,000	$51,000
Account Receivable	0	210,000
Total	$51,000	$261,000

Equities	Basis	Fair Market Value
Note Payable	$30,000	$30,000
Henry, Capital	7,000	77,000
Mark, Capital	7,000	77,000
Sam, Capital	7,000	77,000
Total	$51,000	$261,000

Sam, who has a one- third interest in profits, losses, and liabilities, sells his partnership interest to Beverly, for $77,000 cash on January 1 of this year. Sam's basis in his partnership interest (which, of course, includes a share of partnership liabilities) at the time of the sale was $17,000. In addition, Beverly assumes Sam's share of the partnership liabilities. What is the amount and character of the gain that Sam will recognize from this sale?

Answer rating: 100% (QA)

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