Question

On December 31, Arin Summers owns one share of an S corporation’s 10 outstanding shares of...

On December 31, Arin Summers owns one share of an S corporation’s 10 outstanding shares of stock. The basis of Arin’s share is $300. The next year the S corporation incurs a loss of $3,650. Determine the amount of the loss allocated to Arin, and calculate her stock basis at the end of the second year.

Homework Answers

Answer #1
Arin is 10% shareholder of S corporation as he owns 1 share out of 10 shares
so the share of loss is $3650*10%= $365. Out of $365 only $300 loss can be allocated
at the end of second year which is lomited to his basis of $300 and the remaning $65
loss will be carried forward.
The basis of Arin will be reduced to $0 as $300 basis last year is offset by $300 loss of this year.
If any doubt please comment. If satisfied you can rate
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