Suppose Clampett,Inc.terminated its S election on August 28,2017.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 2018,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 2018?

Question

Quizplus · Accepted Answer

J.D. can deduct the loss up to the amount of his stock basis and at-risk amount. In 2018, he made a total capital contribution of $17,000, but only the $5,000 contributed before the end of the tax year (March 15) can be used to increase his basis for that year. Therefore, he can deduct $5,000 of the suspended loss.