Laurie is a 70% shareholder in Martin Ltd. ,a calendar year S corporation.As of January 1,2014,Laurie's basis in her stock investment was $400,000.During 2014,she made an additional capital contribution to Martin of $90,000 and also loaned the corporation $80,000.During 2014,Martin Ltd.had an operating loss of $900,000.One of the results of these transactions as to 2014 is that:

Question

Quizplus · Accepted Answer

Laurie's share of the recognized loss,$630,000 (70% × $900,000),is limited to her basis in the stock and any loans she has made to the corporation.Thus,her available basis for a loss pass-through is $570,000 [$400,000 (stock basis)+ $90,000 (capital contribution)+ $80,000 (loan to corporation)].The remaining unused loss of $60,000 ($630,000 - $570,000)can be carried over to future years.

Laurie Is a 70% Shareholder in Martin Ltd