Identify Which of the Following Statements Is False

question 57

Multiple Choice

Identify which of the following statements is false.

• A) 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.
• B) 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.
• C) A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness.
• D) Debt basis is restored before stock basis.

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Definitions:

Export Markets

Countries or regions where goods and services are sold abroad, outside the producing country's borders.

Penetration Pricing Strategy

A strategy where a company sets the price of a product very low to get customers to try it.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in that market.

Skimming Pricing Strategy

A pricing approach where a relatively high price is set for a new product or service at its launch to maximize profitability before aiming at more price-sensitive customers.