As of January 1, 2017, Amanda, the sole shareholder of Tern (a calendar year S corporation), had a basis in her stock of $50,000. During 2017, 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, 2018?

Question

Quizplus · Accepted Answer

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

As of January 1, 2017, Amanda, the Sole Shareholder of Tern