Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas. In 2014, the basis in his stock is $30,000, before the adjustment for this year's losses. During 2014, Randall's share of the corporation's ordinary loss is $20,000, and his share of its capital loss is $15,000. How much can Randall deduct due to these losses?

Question

Quizplus · Accepted Answer

First, we need to calculate Randall's adjusted basis in the stock:

Beginning basis: $30,000
Plus: Share of ordinary loss: $20,000
Plus: Share of capital loss: $15,000
Adjusted Basis: $65,000

Randall can deduct the losses up to his adjusted basis in the stock, which is $65,000. Since the ordinary loss exceeds the adjusted basis, it is limited to the adjusted basis. The capital loss can be deducted in full.

Therefore, Randall can deduct:
- $17,143 of the ordinary loss ($20,000 limited to adjusted basis)
- $12,857 of the capital loss (full amount)

So, the answer is C) $17,143 ordinary loss; $12,857 capital loss.

Randall Owns 800 Shares in Fabrication, Inc