Identify Which of the Following Statements Is False

question 31

Multiple Choice

Identify which of the following statements is false.

• A)Randy is a shareholder in an S corporation. His stock basis is $10,000 and his basis in a loan he made to the corporation is $3,000. Randy's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at-risk and passive activity limitations, Randy can deduct the loss in full.
• B)A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness.
• C)A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss-passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder.
• D)Debt basis is restored before stock basis.

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Definitions:

Fundamental Attribution Error

A cognitive bias where people tend to overemphasize personal characteristics and underestimate situational factors in explaining others' behavior.

Automobile Accident

An unforeseen and unplanned event involving vehicles, which may result in damage or injury.

Recklessness

A disregard for or indifference to the risks of one's actions and their potential harm to oneself or others.

Wet and Slippery

A description of surfaces that are covered with, or have been made slick by, a liquid, making them potentially hazardous.