Jeff, a 52% owner of an S corporation has a

Jeff, a 52% owner of an S corporation has a stock basis of zero at the beginning of the year. Jeff's basis in a $10,000 loan made to the corporation and evidenced by a corporate note has been reduced to zero by pass-through losses. During the year, Jeff's share of taxable income is $8,000 and there are no distributions. However, the corporation repays the $10,000 loan principal to Jeff. Discuss the tax effects. Additionally, assume that there was no corporate note (i.e. only an account payable). Does this change your answer? Explain.


Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...