Randall owns 800 shares in Fabrication,Inc. ,an S corporation in Moss Hill,Texas.In 2014,the basis in his stock is $30,000,before the adjustment for this year's losses.During 2015,Randall's share of the corporation's ordinary loss is $20,000,and his share of its capital loss is $15,000.How much can Randall deduct due to these losses?

Question

Quizplus · Accepted Answer

First, we need to calculate Randall's adjusted basis in his stock after the losses in 2015:
Adjusted Basis = Original Basis - Ordinary Loss + Non-Deductible Expenses - Distributions Received
Since there were no non-deductible expenses or distributions received, the adjusted basis would be:
Adjusted Basis = $30,000 - $20,000 - $15,000 = $-5,000
Since the adjusted basis is negative, Randall cannot deduct any of the losses in 2015 against his other income. However, he can deduct up to $3,000 of the capital loss against his other income and carry forward the remaining amount to future years. Therefore, the total amount that Randall can deduct in 2015 is:
Ordinary Loss: $0
Capital Loss: $3,000
Thus, choice C is the correct answer.

Randall Owns 800 Shares in Fabrication,Inc