Question

Suppose that at the beginning of 2019 Jamaal's basis in his S corporation stock is $0,...

Suppose that at the beginning of 2019 Jamaal's basis in his S corporation stock is $0, he has a $0 debt basis associated with a $20,000 loan he made to the S corporation, and he has a $15,000 suspended loss from the S corporation. In 2019, Jamaal contributed $18,000 to the S corporation, and the S corporation had ordinary income of $14,000. Assume that Jamaal owns 40 percent of the S corporation. How much net income or loss does Jamaal report this year from the S corporation?

Multiple Choice

  • $5,600 income.

  • $9,400 loss.

  • None of the choices are correct.

  • $1,000 loss.

  • $14,000 income

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Answer #1

Answer

Step 1 Correct answer is $9400 loss

Step 2 Explanation

Ordinary income (14000*40%) =5600

Less : suspended loss. =15000

________

Net loss reported. =(9400)

Jamaal may deduct the $15000 loss carryover against his debt basis, which was increased by his $18000 contribution and his $5600 share of S corporation income

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