King Corporation, an electing S corporation, is 100% owned by Crystal. On January 1 of the current
Question:
King Corporation, an electing S corporation, is 100% owned by Crystal. On January 1 of the current year her adjusted basis in the King stock is $30,000.
During the year, King reports an ordinary loss of $30,000, tax-exempt income municipal bond income of $15,000, dividend income from domestic corporations of $5,000, a long-term capital loss of $20,000 and a short-term capital loss of $30,000. How much of the ordinary loss can Crystal deduct?
a) 0 b) 18,750 c) 30,000 d) 50,000
Can you please let me know if the following solution is correct?
BOY stock basis 30,000 + dividends 5,000 + tax exempt in 15,000 - ordinary loss 30,000 - LTCL 20,000 = 0 end of the yr stock basis
of the 20,000 STCL, the shareholder can deduct 3,000 on her personal tax return. As for the ordinary income, 0 of that can be deducted, since her basis absorbed the ordinary loss.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill