In Applying the Basis Limitation on the Deduction of S

question 37

Multiple Choice

In applying the basis limitation on the deduction of S corporation losses, which of the following statements is true?

• A) The basis of a shareholder's interest in an S corporation, for purposes of limiting deductibility of losses, is computed in the same manner as a partner's basis in a partnership interest.
• B) A shareholder is permitted to deduct losses against basis in any debt obligation from the S corporation to the shareholder.
• C) If a shareholder's tax basis in a debt obligation is reduced, any gain resulting from the repayment of that obligation is considered ordinary income.
• D) All of these statements are false.

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Definitions:

Mastoid

A part of the temporal bone of the skull, located behind the ear, containing air cells that help regulate ear pressure.

Left Ear

The hearing organ located on the left side of the head, responsible for detecting sound.

Productivity Growth

An increase in the efficiency of production, often measured by the output of goods and services per unit of input over time.

Savings Rate

The percentage of money that individuals or households save from their disposable income.