Randall owns 800 shares in Fabrication,Inc. ,an S corporation in Moss Hill,Texas.In 2010,his basis in his stock is $30,000,before the adjustment for this year's losses.During 2010,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

As Randall's basis in his stock is $30,000, his deductibility of losses is limited to this amount. His share of the corporation's total loss is $35,000 ($20,000 ordinary loss + $15,000 capital loss). Since it is less than his basis, Randall can deduct all of it. Therefore, he can deduct $17,143 ($20,000 x $30,000/$35,000) ordinary loss and $12,857 ($15,000 x $30,000/$35,000) capital loss.

Randall Owns 800 Shares in Fabrication,Inc