Suppose Clampett, Incorporated, terminated its S election on August 28, 2020. 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 $20,750. In 2021, J.D. made additional capital contributions of $5,750 on March 15 and $14,250 on September 20. How much loss may J.D. deduct in 2021?

Question

Quizplus · Accepted Answer

J.D. can deduct the loss up to the amount of his capital contributions made during the year. Since he contributed $5,750 on March 15, he can deduct this amount in 2021. The contribution on September 20 does not affect the 2021 deduction as it was made after the S corporation's short tax year ended.

Suppose Clampett, Incorporated, Terminated Its S Election on August 28