68.Suppose at the beginning of 2015, Jerry\'s basis in his S corporation stock w

Question

68.Suppose at the beginning of 2015, Jerry's basis in his S corporation stock was $27,000 and that Jerry has loaned the S corporation $10,000. During 2015, the S corporation reported an $80,000 ordinary business loss and no separately stated items. After any loss deductions this year, what is Jerry's stock and debt basis at the end of the year if Jerry is a 50% shareholder of the S corporation?

A. $27,000 stock basis; 10,000 debt basis.

B. $0 stock basis; $10,000 debt basis.

C. $67,000 stock basis; $10,000 debt basis.

D. -$13,000 stock basis; $10,000 debt basis.

E. None of these.

Explanation / Answer

Income will be distributed to shareholders in the form of Dividend and if there is losses then it will be carry forward and there is no distribution to shareholders.

So, Jerry's Basis in Corporation stock $ 27,00 will not change and it will be remain the same as $ 27,000

In Addittion to this Jerry has give a loan of $ 10,000 to S corporation so he have the Debt Basis is $ 10,000

As per the Above, Answer = Option A =  $27,000 stock basis; 10,000 debt basis.

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