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:

Ethanol

A renewable fuel made from various plant materials, commonly used as an additive to gasoline to reduce emissions and increase octane.

Government Subsidized

Financial support provided by a government to individuals, organizations, or industries to encourage or protect economic activities deemed beneficial.

Medicaid Program

A government-funded program in the United States providing health coverage to eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities.

Federal Government

The national government of a federation, made up of separate states, where powers are divided between the national government and the state governments.