Question

Question content areaon 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. $32,877
b. $-0-
c. $16,438
d. $13,562

Answer 1

Bobby is allocated $32,877 of the $60,000 S Corporation loss, as losses are allocated based on the number of days each shareholder owns the stock during the tax year. Therefore correct option is A

Step-by-step explanation:

To determine how much of the $60,000 loss is allocated to Bobby, one needs to consider how S Corporations allocate losses among shareholders. In an S Corporation, losses are typically allocated based on the number of days each shareholder owns the stock during the tax year.

Since Bobby sold his stock to Saul on the 200th day of the year, he owned the stock for 200 days out of the 365 days in the year.

To calculate Bobby's share of the loss, we take the total loss ($60,000) multiplied by the fraction of the year he owned the stock (200/365), which equals $32,877.

Therefore, Bobby is allocated $32,877 of the $60,000 loss.