A shareholder purchases 30 percent of the stock of an S corporation two-thirds of the way through the year for $20,000. The S corporation incurs an operating loss of $300,000 for the year. what the amount that the shareholder may deduct on his personal income tax return, assuming the at-risk and passive activity rules do not apply?

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Randall Huffman

27 May, 22:18

A shareholder purchases 30 percent of the stock of an S corporation two-thirds of the way through the year for $20,000. The S corporation incurs an operating loss of $300,000 for the year. what the amount that the shareholder may deduct on his personal income tax return, assuming the at-risk and passive activity rules do not apply?

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Emilia · Answer 1

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Explanation:

In most cases, the shareholder will receive a K-1 reporting a loss of approximately $30,000.

($300,000*122/365*30%).

Regardless of what the K-1 says, the shareholder is subject to at-risk and passive activity loss rules and will only be able to deduct $20,000 on his return. The balance will be carried forward.