In Applying the Basis Limitation on the Deduction of S

question 88

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 the above statements are false.

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Definitions:

Shortage

At a given price, the amount by which quantity demanded exceeds quantity supplied; a shortage usually forces the price up.

Low-Calorie Substitutes

Food or drink products with fewer calories than the standard versions, often used for weight management.

Saccharin

An artificial sweetener used as a sugar substitute, known for its zero-calorie content but with a somewhat bitter aftertaste.

Aspartame

Aspartame is an artificial, non-saccharide sweetener used as a sugar substitute in many foods and beverages.