Suppose at the beginning of 2018, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has directly loaned the S corporation $10,000. During 2018, the S corporation reported an $80,000 ordinary business loss and no separately stated items. After any loss deductions this year, what is Jamaal's stock and debt basis at the end of the year if Jamaal is a 50% shareholder of the S corporation?

Question

Quizplus · Accepted Answer

$0 stock basis; $0 debt basis; the $40,000 loss first offsets stock basis and then debt basis. However, the loss may not cause either the stock basis or the debt basis to drop below zero.

Suppose at the Beginning of 2018, Jamaal's Basis in His