Shelley Owns a 25% Interest in a Qualifying S Corporation

question 41

Essay

Shelley owns a 25% interest in a qualifying S corporation.Shelley's basis in the stock was $15,000 at the beginning of the year.Shelley made no capital contributions and received no distributions during the year.Shelley loaned the S corporation $20,000 this year.The S corporation incurred a $160,000 ordinary loss this year.
a.What are the amounts of Shelley's deduction and carryover of the unused loss for the year?
b.What is the amount of Shelley's basis in the stock at the end of year one?
c.If the S Corporation earned net income of $200,000 in year two,what is the amount of Shelley's stock basis at the end of year two?

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Definitions:

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Syllogistic Method

The syllogistic method is a form of logical reasoning that uses deductive arguments consisting of a major premise, a minor premise, and a conclusion.

Walk-In Refrigerator

A large cooling unit or room that can be entered, commonly used in commercial kitchens for storing perishable goods.

Major Premise

In logic and rhetoric, the broader statement in a syllogism that provides the basis for the conclusion.