1D. On 1-1-X1, Mt. Vear purchased 50 percent of S Corporatlon Z\'s only class of

Question

1D. On 1-1-X1, Mt. Vear purchased 50 percent of S Corporatlon Z's only class of stock outstanding for $100,000. On 12-1-X1, he purchased the other 50 percent of its stock. For 20XI, Z Corporatlon had a net operating loss of $255,500. How much of the loss can Mr. Vear deduct on his Individual Income tax return.for 20xI? . $138,600 b. $200,000 c. $234,208 d. $255,500 11. Income from an S corporation Is taxed at a. the shareholder level b the corporate level. c both the shareholder level and the corporate level. d. None of the above 2. Advantages of an S corporation Incdlude a Ilmlted llablity b. single level of taxation. c not subject to the personal holding company tax d. All of the above e. None of the above 13. Which of the following is not a requirement of a "small business corporation? a. It must be a domestie corporation. b. It can never have more than 100 shareholders c. It must use the reserve method of accounting d. It can only have one class of stock

Explanation / Answer

10 a 138600 An S corporation shareholder includes his/her pro rata share of loss from the S corporation [Sec. 1366(a)]. Sec. 1377(a) defines pro rata share as the taxpayer's share of loss determined on a per-day and then a per-share basis. The loss for the whole year was $255,500, which is $700 per day ($255,500 ÷ 365 days). Therefore, Vear's share is $138,600 [$127,750 + ($700 × 50% × 31 days)] because Vear owned 50% of the stock for the full year and the other 50% for 31 days. 11 a   Shareholder's level 12 All of the above 13 c It must use the reserve method of accounting

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