Question

On January 1, Bobby and Alice equally own all of the stock of an electing S corporation called Prairie Dirt Delight. The entity incurs a $60,000 loss for a nonleap year. On the 200th day of the year (not a leap year), Bobby sells his one-half of the stock to his son, Saul. How much of the $60,000 loss, if any, is allocated to Bobby?

a. $6,781
b. $13,562
c. $16,438
d. $23,219

Answer 1

the Loss allocated to Bobby is $6,781

Step-by-step explanation:

The amount of loss allocated to Bobby is as follows;

Loss allocated to Bobby is

= Total loss for the year × Share of Alice × Share of Bobby × for the remaining days

= $60,000 × 50% × 50% × (365 - 200) ÷ 365

= $6,781

Hence, the Loss allocated to Bobby is $6,781

Therefore the correct option is a.