Taxability of Distributions. Beta Corporation, an S corporation with one shareholder, incurred the following items:

17,000

At the beginning of Year 1, the shareholder's stock basis was $20,000, and her debt basis was $16,000.

a. Assuming the corporation has no accumulated E&P, show items reported by the share-holder in each year, show all basis adjustments to stock and debt, and show the stock and debt bases at the end of each year.

b. Redo Part a for Year 2 and Year 3 assuming ordinary income in Year 2 is $8,000 in-stead of $27,000.