Question

Charlie's adjusted basis in S corporation stock was $12,000. His share of S corporation losses was $22,000. How much of the loss clears the basis limitation and what is the treatment of the remaining loss (if any)

Answer 1

1. $12,000 is the amount of the loss that will clear the basis limitation

2.Remaining loss of the amount of $10,000 will be put on hold

Step-by-step explanation:

Calculation of How much of the loss clears the basis limitation and what is the treatment of the remaining loss

Based on the information given his adjusted basis in S corporation stock was the amount of $12,000 which means that the amount of $12,000 will be the amount of the loss that will clear the basis limitation

Secondly since his share of S corporation losses was the amount of $22,000 which means that the remaining loss will be $10,000($22,000-$12,000).

Based on this the remaining loss of the amount of $10,000 will be put on hold and can be carried forward at unspecified period of time while the amount of $12,000 may be deducted in the current year.