Suppose at the beginning of 2018, Jamaal's basis in his S corporation stock is $0, he has a $0 debt basis associated with a $10,000 loan he made to the S corporation and a $5,000 suspended loss from the S corporation. In 2018, Jamaal contributed $8,000 to the S corporation, and the S corporation had ordinary income of $4,000. Assume that Jamaal owns 40% of the S corporation. How much net income or loss does Jamaal report this year from the S corporation?

Question

Quizplus · Accepted Answer

$1,600 ordinary income ($4,000 × 40%) − $5,000 suspended loss = $3,400 loss. Jamaal may deduct the $5,000 loss carryover against his debt basis, which was increased by his $8,000 contribution and his $1,600 share of S corporation income.

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