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:

Fort Henry

A historical military fortification in Kingston, Ontario, Canada, originally built during the War of 1812 to protect the British-Canadian border from potential American attacks.

Gettysburg

A historic town in Pennsylvania, known as the site of a pivotal Civil War battle in 1863 and Abraham Lincoln's Gettysburg Address.

Emancipation Proclamation

A presidential decree issued by Abraham Lincoln on January 1, 1863, declaring the freedom of all slaves in Confederate territory, marking a pivotal moment in the United States Civil War.

Union Army

The army that represented the Northern states of the United States during the American Civil War.