Jeff Owns 50% of an S Corporation's Stock with a Basis

question 96

Essay

Jeff owns 50% of an S corporation's stock with a basis in his stock of $50,000 on January 1. In addition, the S corporation owes Jeff $30,000 on January 1. The debt has a basis of $30,000 and is evidenced by a note. The S corporation reports an ordinary loss of $150,000 for the current year. The next year, it reports ordinary income of $20,000. On January 1 of the third year, the note is repaid. Due to the repayment of the note, Jeff must report what?

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Definitions:

Smooth Muscle Fibers

Muscle tissue that is involuntary, non-striated, and found in the walls of internal organs and blood vessels.

Cardiac Muscle Fibers

Specialized muscle fibers found in the heart that enable its contraction and beating.

Involuntary Control

The regulation of bodily functions not under conscious control, such as heartbeat and digestion.

Striations

Linear marks, grooves, or ridges on a surface, often observed in muscle tissue or rocks.