Raina owns 100% of Tribo Inc.,an S corporation.She started the business this year with a $100,000 capital contribution.In addition,the business borrowed $50,000 from the bank which she had to guarantee.Tribo incurred a first year operating loss of $170,000.Raina will deduct an ordinary loss this year of

Question

Quizplus · Accepted Answer

Raina can only deduct losses up to her basis in the S corporation. Her basis is $100,000 from her capital contribution. The bank loan does not increase her basis because it is not a direct loan from her to the corporation. Therefore, she can only deduct $100,000 of the loss.

Raina Owns 100% of Tribo Inc