Jared Owns 50% of an S Corporation's Stock

question 51

Multiple Choice

Jared owns 50% of an S corporation's stock. His basis in the stock was $50,000 on January 1, 2017. On February 1, 2017, the S corporation borrowed $30,000 from Jared, signing a formal note. The S corporation reported an ordinary loss of $150,000 at the end of 2017 and ordinary income of $20,000 at the end of 2018. What are Jared's bases in his stock and his note at the end of both 2017 and 2018?

• A) At the end of 2017, his stock basis is zero and note basis is $30,000; at the end of 2018, his stock basis is $10,000 and his note basis is $30,000
• B) At the end of 2017, his stock basis is zero and note basis is $5,000; at the end of 2018, his stock basis is zero and his note basis is $15,000
• C) At the end of 2017, his stock basis is zero and note basis is $5,000; at the end of 2018, his stock basis is zero and his note basis is $30,000
• D) At the end of 2017, his stock basis is zero and note basis is $30,000; at the end of 2018, his stock basis is $10,000 and his note basis is $15,000

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Definitions:

Homestead Exemption

A legal provision that helps protect a homeowner's primary residence from creditors by allowing a portion of the property's value to be exempt from certain debts and taxes.

Property Right Exemption

Legal provisions that protect certain properties from seizure or claims by creditors.

Writ Of Execution

A court order authorizing the enforcement of a judgment, typically involving the seizure or sale of the debtor's property.

Order Of Attachment

A court order directing the seizure of a debtor's property to secure satisfaction of a judgment.