Question

At the beginning of the year, Ann and Becky own equally all of the stock of Whitman, Inc., an S corporation. Whitman generates a $120,000 loss for the year. On the 189th day of the year, Ann sells her half of the Whitman stock to her son, Scott. Becky's stock basis is $41,300. How much of the Whitman loss belongs to Ann and Becky

Answer 1

Becky's loss = $60,000

Ann's loss = $31,068

Step-by-step explanation:

Assuming a 365 day year, the loss allocation should be as follows:

• Ann (then Scott) 50% x $120,000 = $60,000
• Becky 50% x $120,000 = $60,000

From the 50% that corresponds to Ann:

• Ann = 189/365 x $60,000 = $31,068.49 = $31,068
• Scott = $60,000 - $31,068 = $28,932