1. Wanda owns 100% of S corporation, Milk Enterprises. At the beginning of 2017,
ID: 2529005 • Letter: 1
Question
1. Wanda owns 100% of S corporation, Milk Enterprises. At the beginning of 2017, she had a zero basis and an unused ordinary loss carry over from Milk Enterprises in the amount of $5,000. During the year, Wanda secured a bank loan of $10,000 on her personal residence and made a shareholder loan of that amount to Milk Enterprises. At the end of 2017, Milk Enterprises reported on its Schedule K a $1,000 ordinary loss and a $3,000 cash distribution made to Wanda. Wanda has $10,000 in flow-through reportable income from other S corporations. How much of Milk Enterprises’ ordinary loss can Wanda deduct on her personal return?
A.
$6,000 in loss.
B.
$5,000 in loss.
C.
$3,000 in loss.
D.
$0 in loss.
2. On January 1, Year 1, Acme, Inc., a calendar-year S corporation, was owned by four individuals as follows: John, 50%; Bob, 25%; Dave, 20%; and Tom, 5%. On March 31, Year 1, John sold his shares to Bob. On the same day, Dave sold his shares to Tom. For the tax year ending December 31, Year 1, Acme realized an operating loss of $100,000. Assuming that all four had sufficient basis in their stock, calculate each shareholder’s recognizable loss for the Year 1 tax year. To assist in the calculation, assume a 360-day calendar year, with 30 days in each month.
A. John: $50,000, Bob: $25,000, Dave: $20,000, and Tom: $5,000.
B. John: $0, Bob: $75,000, Dave: $0, and Tom: $25,000.
C. John: $12,500, Bob: $62,500, Dave: $5,000, and Tom: $20,000.
D. John: $12,500, Bob: $56,200, Dave: $5,000, and Tom: $18,750.
3. Mary is a 50% shareholder in an S corporation, which suffered a $100,000 loss for the tax year ending December 31, 2002. Mary’s basis in her stock as of December 31, 2002 was $25,000. What can Mary do with the disallowed loss of $25,000?
A. Carry back the loss three years to offset any personal taxes paid.
B. Carry forward the loss indefinitely for use if her basis in her stock is sufficiently restored.
C. Nothing. There is no provision for using disallowed losses from an S corporation, in any other tax year but that in which the loss occurred.
D. Mary does not have a disallowed loss and can use the full $50,000 loss in the 2002 tax year.
4. On January 1, 1999, Bob purchased 50% of the stock of Lebeck Industries, an S corporation, for $100,000, and Bob also loaned the corporation $20,000. At the end of the 1999, Lebeck Industries incurred in ordinary loss of $180,000. How much of the loss can Bob deduct on his personal income tax return for 1999?
A. $ 90,000
B. $180,000
C. $ -0-
D. $120,000
A.
$6,000 in loss.
B.
$5,000 in loss.
Explanation / Answer
As per policy only first question will be answered
1. Answer is option A $6,000 in loss
Due to the loan, Wanda increases her debt basis in Milk Enterprises by the amount of the loan, $10,000.Basis is then decreased by $3,000 in distributions, then $1,000 in ordinary loss resulting in an adjustedbasis of $6,000. She can also claim her suspended loss of $5,000 as she now has enough basis to do so.The total ordinary loss deductions are therefore $6,000. The fact that she has income from other Scorporations is irrelevant.
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