In its first year of existence, SMS, an S corporation, reported a business loss of $10,000. Michelle,

Question:

In its first year of existence, SMS, an S corporation, reported a business loss of $10,000. Michelle, SMS’s sole shareholder, reports $50,000 of taxable income from sources other than SMS. What must you know to determine whether she can deduct the $10,000 loss against her other income? Explain.

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