Emma owns 40% of Johnson, Inc., a regular C corporation, that reported a net loss of $50,000 for the year.Emma acquired her stock on January 1 of the current year by investing $4,000 cash.In July, the corporation took out a bank loan for $25,000.How much of the loss can Emma deduct on her tax return for the year?
A)$0
B)$4,000
C)$9,000
D)$10,000

Question

Quizplus · Accepted Answer

Emma cannot deduct any of the loss on her personal tax return because losses from C corporations are not passed through to their shareholders. Shareholders of a C corporation cannot deduct the corporation's losses on their personal tax returns; instead, the corporation itself carries the loss forward or backward to offset its own future or past taxable income.

Emma Owns 40% of Johnson, Inc