Question

Suppose at the beginning of 2018, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has directly loaned the S corporation $10,000. During 2018, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?

Answer 1

$37,000

Step-by-step explanation:

Given:

Jamaal's basis in his S corporation stock = $27,000

Jamaal has directly loaned the S corporation = $10,000

Ordinary business loss = $80,000

Now,

for computing Jamaal's stock and debt basis, the losses are limited to stock basis and the debt basis.

thus,

Stock basis = $27,000

Debt basis = $ 10,000

hence,

Jamaal's stock and debt basis at the end of the year = $27,000 + $10,000

= $37,000