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 2014, 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

Since Fabrication, Inc. is an S corporation, Randall can deduct his share of the corporation's losses (both ordinary and capital) on his personal tax return. First, he can deduct the $20,000 ordinary loss, up to the amount of his basis in the stock ($30,000). This leaves him with a basis of $10,000. Then, he can deduct his share of the capital loss, up to the amount of his remaining basis in the stock. This would be $10,000 for his share of the $15,000 capital loss. Therefore, Randall can deduct $17,143 ($20,000 - $2,857) as an ordinary loss and $12,857 ($15,000 - $2,857) as a capital loss.

Randall Owns 800 Shares in Fabrication, Inc