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 5. How much loss may J. D. deduct in 2018?

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Quizplus · Accepted Answer

The correct answer is D.J.D.'s suspended loss carries over to the C corporation year. However, the suspended loss is limited to the amount of his stock basis plus at-risk amount. J.D.'s stock basis is $17,000 ($5,000 + $12,000). He has no at-risk amount. Therefore, J.D. may deduct $17,000 of his suspended loss in 2018.