Suppose Clampett, Inc. terminated its S election on August 28, 2017. At the end of the S corporation's short tax year ending on August 28, J. D.'s stock basis and at-risk amounts were both zero (he has never had debt basis), and he had a suspended loss of $20,000. In2018, J. D. made additional capital contributions of $5,000 on March 15 and $12,000 onSeptember 20. How much loss may J. D. deduct in 2018?

Question

Quizplus · Accepted Answer

J. D. can deduct $5,000 of the suspended loss in 2018 because he made a capital contribution of $5,000 on March 15, which increases his stock basis and at-risk amount, allowing him to deduct that portion of the suspended loss.