68.Suppose at the beginning of 2015, Jerry\'s basis in his S corporation stock w
ID: 2601276 • Letter: 6
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
Answer is E
none of these.
$0 stock basis
$0 debt basis;
the $40,000 loss first offsets stock basis and then debt basis.However, the loss may not cause either the stock basis or the debt basis to drop below zero.
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