S Corporation Losses. Melbourne Corporation is an S corporation what ten shareholders. Chris owns 100 shares of stock, which represents a 15% interest in the corporation. His basis for those 100 shares is $12,000. He also has loaned the corporation $4,000 to support the purchase of a special machine. For the year 2019, the corporation reports an operating loss of $120,000. In addition, the corporation made charitable contributions for the year of $10,000.

a. Explain how Chris reports his share of the S corporation’s operating loss and charitable contributions.

b. What is Chris’s basis in his S corporation stock at the end of 2019?

c. Compute the amount for each type of carryover to 2020. Discuss what must happen in order for Chris to be able to deduct these amounts in 2020.

Answer rating: 100% (QA)

ANSWER A A favorable tax basis rule is available to shareholders of S corporations that make charitable donations of appreciated property For such don... View the full answer