As of January 1,2016,Amanda,the sole shareholder of Tern (a calendar year S corporation),had a basis in her stock of $50,000.During 2016,Tern had a net operating loss of $100,000 and distributed a $70,000 dividend to Amanda.What is Amanda's basis in her Tern stock as of January 1,2017?

Question

Quizplus · Accepted Answer

Amanda's basis in her stock is reduced by the net operating loss and the distribution. Starting with a basis of $50,000, the $100,000 loss reduces it to ($50,000), and the $70,000 distribution further reduces it to ($120,000). However, basis cannot be negative, so it is limited to $0.

As of January 1,2016,Amanda,the Sole Shareholder of Tern (A Calendar