Suppose Clampett, Inc. terminated its S election on August 28, 2016. At the end of the S corporation's short tax year ending on August 28, J. D.'s stock basis and at-risk amounts were both zero (he has never had debt basis), and he had a suspended loss of $20,000. In 2017, J. D. made additional capital contributions of $5,000 on March 15 and $12,000 on September 20. How much loss may J. D. deduct in 2017?

Question

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J. D. can deduct the loss up to the amount of his stock basis and at-risk amount. In 2017, he contributed a total of $17,000, but only the $5,000 contributed before the end of the S corporation's tax year (March 15) can be used to increase his basis for the suspended loss.