Question

Neymar had a basis of $16,000 in an S corporation at the beginning of the year. The S corporation reported a $30,000 ordinary loss (Neymar's share) for the year. Neymar loaned $18,000 to the S corporation during the year. How much loss can Neymar deduct under the basis rules?

Answer 1

Neymar can deduct the full $30,000 loss under the basis rules.

Step-by-step explanation:

When an S corporation reports a loss, the shareholders can deduct their share of the loss from their basis in the corporation. Neymar had a basis of $16,000 in the S corporation at the beginning of the year and the corporation reported a $30,000 ordinary loss, which is Neymar's share. Neymar also loaned $18,000 to the corporation during the year.

To calculate how much loss Neymar can deduct under the basis rules, we need to consider his initial basis, the loss he shares, and any additional basis from loans to the corporation. In this case, Neymar's total basis is $16,000 + $18,000 = $34,000. Since the loss is greater than his basis, he can deduct the full $30,000 loss from his basis.

In summary, Neymar can deduct the full $30,000 loss under the basis rules.