Cactus Company Is a Calendar Year S Corporation with the Following

question 72

Multiple Choice

Cactus Company is a calendar year S corporation with the following current year information: $\begin{array}{lr}\text {Operating loss }&\$(120,000) \\\text { Liabilities: }\\\text { Notes payable, City Bank}&20,000\\\text {Notes payable, Jake Crow }&20,000\\\end{array}$
On January 1, John James bought 50% of Cactus Company stock for $30,000. How much of the operating loss may John deduct on his Form 1040? Assume the excess business loss limitation does not apply.

• A) $60,000
• B) $30,000
• C) $40,000
• D) $50,000

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Definitions:

Hearsay

Testimony that is given in court by a witness who relates not what he or she knows personally, but what others have said, and that is therefore generally not admissible as evidence.

Irrelevant Evidence

Evidence in a legal proceeding that is not directly related to the case at hand, making it inappropriate for consideration during the decision-making process.

Circumstantial Evidence

Evidence that indirectly proves a fact through an inference, as opposed to direct observation or testimony.

Direct Evidence

Evidence that directly proves a fact without needing any inference or presumption, such as eyewitness testimony.