Stephanie owns a 25% interest in a qualifying S corporation. Stephanie's basis in the stock was $40,000 at the end of the year after adjustments are made for capital contributions and distributions (but not operating results). Stephanie also loaned the S corporation $10,000 this year. The S corporation incurred a $240,000 ordinary loss this year. Assume that next year the S corporation's ordinary income is $160,000. Stephanie's basis in her stock at the end of next year is
A. $10,000.
B. $20,000.
C. $30,000.
D. $40,000.
Answer: B
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