If a Shareholder Does Not Have Sufficient Stock Basis to Deduct

question 3

Multiple Choice

If a shareholder does not have sufficient stock basis to deduct his or her share of an S corporation's losses and deductible items, what are the tax consequences?

• A)The excess losses and deductions may be carried back 3 years and then forward up to 5 years to offset other income items of identical character.
• B)The excess losses and deductions are suspended until the corporation's or shareholder's future activities generate sufficient new basis against which to deduct the losses
• C)The excess losses and deductions may not be deducted at any time and can never provide tax benefit.
• D)None of the above.

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Definitions:

Working Conditions

The environment and terms under which employees perform their jobs, including aspects such as hours, safety, and amenities.

Business Perspective

This refers to the viewpoint or approach to decision-making undertaken from the standpoint of business strategy and outcomes.

Perfectly Competitive Labor Market

An idealized labor market scenario where there are many employers and employees, no single entity can influence wages, and all workers are fully informed and mobile.

Unionized Firms

Companies where a majority of workers are members of a labor union, which represents them in negotiations with management.