Identify which of the following statements is false.
A)Randy is a shareholder in an S corporation. His stock basis is $10,000 and his basis in a loan he made to the corporation is $3,000. Randy's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at-risk and passive activity limitations, Randy can deduct the loss in full.
B)A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness.
C)A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss-passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder.
D)Debt basis is restored before stock basis.

Question

Quizplus · Accepted Answer

Acting as a guarantor on a corporate indebtedness does not increase a shareholder's basis in an S corporation. The basis is increased by direct contributions or direct loans to the corporation, not by guarantees.

Identify Which of the Following Statements Is False