Randall owns 800 shares in Fabrication, Inc., an S corporation in Moss Hill, Texas.In 2012, his basis in his stock is $30,000, before the adjustment for this year's losses.During 2012, 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

To determine Randall's deductible losses, we need to calculate his adjusted basis in his stock after taking into account the losses.

Adjusted Basis = Original Basis - (Ordinary Loss + Capital Loss)

Adjusted Basis = $30,000 - ($20,000 + $15,000) = $30,000 - $35,000 = ($5,000)

Since Randall's adjusted basis is negative, he cannot deduct any of the losses in the current year. However, he can carry forward the unused losses to future years and offset any future income from the S corporation, up to his adjusted basis.

Therefore, the correct answer is C, as it shows the breakdown of the losses, but also indicates that Randall cannot deduct them in the current year due to his negative adjusted basis.

Randall Owns 800 Shares in Fabrication, Inc