Identify which of the following statements is true.
A)The overall S corporation loss limitation equals the shareholder's adjusted basis for his/her S corporation stock plus his/her ratable share of all S corporation liabilities.
B)The loss pass-throughs from an S corporation may produce a net operating loss for the shareholder.
C)An S corporation shareholder can increase the adjusted basis of his/her stock by any indebtedness owed the shareholder by the S corporation.
D)All of the above are false.

Question

Quizplus · Accepted Answer

The pass-through of S corporation losses can produce a net operating loss for the shareholder, which can be used to offset other income. The other statements are false. The overall S corporation loss limitation is the shareholder's adjusted basis for his/her S corporation stock, and any excess may be carried forward. The shareholder can only increase the adjusted basis of his/her stock by his/her own loans to the S corporation, not by any indebtedness owed to the shareholder by the S corporation.

Identify Which of the Following Statements Is True