Orange, Inc., a calendar year corporation in Clemson, South Carolina, elects S c

Question

Orange, Inc., a calendar year corporation in Clemson, South Carolina, elects S corporation status for 2015. The company generated a $74,000 NOL in 2014 and another NOL of $43,000 in 2015. Orange recorded no other transactions for the year. At all times in 2014 and 2015, the stock of the corporation is owned by the same four shareholders, each owning 25% of the stock. Pete, one of the shareholders, holds a $6,020 basis in the Orange stock at the beginning of 2015.

The deductible loss by Pete is ? , with a carryover of ?.

Explanation / Answer

Pete's share basis at the beginning of year 2015 $6020

Less: Deductible loss by Pete (25 % * $43000) $10750(limited to $6020)    $6020

loss to be carried over ($4730 )   

Note:- Deductible loss is allowed to be limited to share's basis at the beginning and remaining of it would be transfered.

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