Suppose that at the beginning of 2019 Jamaal's basis in his S corporation stock was $36,000 and Jamaal has directly loaned the S corporation $9,830. During 2019, the S corporation reported an $92,500 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50 percent of the S corporation?

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Business

Cory Morrison

18 September, 21:44

Suppose that at the beginning of 2019 Jamaal's basis in his S corporation stock was $36,000 and Jamaal has directly loaned the S corporation $9,830. During 2019, the S corporation reported an $92,500 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50 percent of the S corporation?

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Austin Gamble · Answer 1

Answer and Explanation:

Since Jamaal owns 50% of the S corporation so $92,500 x 50% = $46,250.

However, this loss would offset both the stock basis and debt basis. And this cannot go below zero.