Suppose Clampett, Inc. terminated its S election on August 28, 2018. 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. In 2019, J. D. made additional capital contributions of $5,000 on March 15 and $12,000 on September 20. How much loss may J. D. deduct in 2019?

Question

Quizplus · Accepted Answer

The post transition termination period ends on September 16, 2019 (the extended due date of the final S corporation tax return). Thus, J. D. may only deduct losses to the extent of his $5,000 contribution on March 15.