Taxation of Business Entities: Chapter Study Questions

May 26th, 2016
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Chapter 11: Administration Procedures

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15. What limitations apply to the amount of loss pass-through an S corporation shareholdercan deduct? What happens to any losses exceeding this limitation? What happens to losses if theshareholder transfers his or her stock?What limitations apply to the amount of loss pass-through an S corporation shareholder candeduct?A.Each shareholder's deduction for his or her share of the ordinary loss and the separately stated loss anddeduction items is limited to the sum of the adjusted basis for his or her S corporation stock plus the adjustedbasis of any indebtedness owed directly by the S corporation to the shareholder.B.Each shareholder's deduction for his or her share of the ordinary loss and the separately stated loss and deduction itemsis allowed to be included on the shareholder's taxreturn, limited to overall earned income that is reported on theshareholder's tax return for the year of loss.C.Each shareholder's deduction for his or her share of the ordinary loss and the separately stated loss and deduction itemsis limited to the FMV for his or her S corporation stock plus the actual amount of indebtedness owed directly by the Scorporation to the shareholder.D.Each shareholder's deduction for his or her share of the ordinary loss and the separately stated loss and deduction itemsis allowed to be included on the shareholder's tax return for the current year, but the ordinary loss is limited to theshareholder's stock basis in the S corporation for the year.Wh

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