Ask Question
6 March, 06:19

Dmitri, a shareholder in an S corporation, has a basis of $60,000 in his S corporation stock. His share of this year's S corporation loss is $75,000. Dmitri takes out a $20,000 nonrecourse loan from a local bank and lends the proceeds to the S corporation. As a result of these transactions:a. Dmitri's stock basis is $80,000 before deducting the loss.

b. Dmitri can deduct the loss of $75,000.

c. Dmitri has a stock basis of $60,000 and a loan basis of $20,000 before deducting any loss.

d. Dmitri's stock basis is $5,000 after deducting the loss.

e. None of these choices are correct.

+5
Answers (1)
  1. 6 March, 10:06
    0
    c. Dmitri has a stock basis of $60,000 and a loan basis of $20,000 before deducting any loss.

    Explanation:

    Given

    Stock Basis = $60,000

    Loan Basis = $20,000

    Loss = $75,000

    Note that: A non-recourse loan is a type of loan secured by collateral, which is usually property.

    Because of this, his loan basis remains unchanged at $20,000.

    However, due to the at-risk rules,

    which prevent individuals from deducting more than their actual stake in a business, he can deduct only $60,000 of S corporation losses; this will reduce his stock basis to zero.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Dmitri, a shareholder in an S corporation, has a basis of $60,000 in his S corporation stock. His share of this year's S corporation loss ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers