PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
Author: Jones
Publisher: MCG
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Chapter 10, Problem 29AP
a.
To determine
Ascertain the number of Person L’s share of the loss which can be deducted by him on his 2018 return.
b.
To determine
Compute Person L’s basis in his Company B stock` and his Company B note at the end of 2018.
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On January 1, 2017, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS in return for a promissory note. BLS generated a $600,000 operating loss in 2017.
A. How much of his share of the loss can Leo deduct on his 2017 return? Assume the excess business loss limitation does not apply.
B. Compute Leo’s basis in his BLS stock and his BLS note at the end of 2017.
Ferris owns an interest in, but does not materially participate in, an activity. He has $30,000 at-risk. The business produced a loss in the current year and Ferris's share of the loss is $45,000. Assuming Ferris has no passive income, how much of the $45,000 loss will be deductible by Ferris?
Multiple Choice
$0.
$30,000.
Cannot be determined.
$45,000.
On January 1, Year 1, Carrot, an individual, paid $24,000 for 5 percent of the stock in Root Corp., an S corporation. In November, he loaned $12,500 to Root Corp. in return for a promissory note. Root Corp. generated a $896,000 operating loss in Year 1.
Required:
How much of his share of the loss can Carrot deduct on his Year 1 return?
Compute Carrot’s basis in his Root Corp. stock and his Root Corp. note at the end of Year 1.
Chapter 10 Solutions
PRINCIPLES OF TAXATION F/BUS...(LL)
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