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:

1946

The year post-World War II characterized by significant political, economic, and social changes worldwide, including the beginning stages of the Cold War.

U.S. Territory

A region that is under the jurisdiction of the United States but is not a state, often having different legal and political systems.

Political Climate

The general mood, attitudes, and opinions on political matters within a specific geographical area or population at a given time.

South

Often refers to the southern region of the United States, known for its unique cultural, historical, and socio-economic characteristics.