Jared Owns 50% of an S Corporation's Stock

question 75

Multiple Choice

Jared owns 50% of an S corporation's stock. His basis in the stock was $50,000 on January 1, 2016. On February 1, 2016, 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 2016 and ordinary income of $20,000 at the end of 2017. What are Jared's bases in his stock and his note at the end of both 2016 and 2017?

• A) At the end of 2016, his stock basis is zero and note basis is $30,000; at the end of 2017, his stock basis is $10,000 and his note basis is $30,000
• B) At the end of 2016, his stock basis is zero and note basis is $5,000; at the end of 2017, his stock basis is zero and his note basis is $15,000
• C) At the end of 2016, his stock basis is zero and note basis is $5,000; at the end of 2017, his stock basis is zero and his note basis is $30,000
• D) At the end of 2016, his stock basis is zero and note basis is $30,000; at the end of 2017, his stock basis is $10,000 and his note basis is $15,000

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Definitions:

Contracture

The permanent tightening of muscles, tendons, skin, and other tissues, leading to decreased range of motion and mobility.

Skeletal Muscle Tissue

A type of muscle tissue that is attached to bones, responsible for voluntary movements of the body parts.

Tendon

A flexible but inelastic cord of strong fibrous collagen tissue attaching a muscle to a bone.

Fibromyalgia

A chronic disorder characterized by widespread musculoskeletal pain, fatigue, and tender points.