Suppose Clampett, Incorporated, Terminated Its S Election on August 28

question 6

Multiple Choice

Suppose Clampett, Incorporated, terminated its S election on August 28, 2020. At the end of the S corporation's short tax year ending on August 28, J.D.'s stock basis and at-risk amounts were both zero (he has never had debt basis) , and he had a suspended loss of $20,000. In 2021, J.D. made additional capital contributions of $5,000 on March 15 and $12,000 on September 20. How much loss may J.D. deduct in 2021?

• A)$0
• B)$5,000
• C)$17,000
• D)$20,000
• E)None of the choices are correct.

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Definitions:

Shareholders Votes

The rights of shareholders to vote on corporate matters, such as electing directors or approving policies, typically based on the number of shares they own.

Trust Holdings

Assets held in a trust by one party for the benefit of another, including real estate, stocks, bonds, and other investments.

Tax Rate

The percentage at which an individual or entity is taxed on their income or property.

Employee Stock Ownership Plans

Retirement plans designed to give employees ownership interest in the company by allowing them to acquire stock, contributing to company success and employee benefit.