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:

Low-Birth-Weight

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Early Months

The initial period following an event, often emphasizing the beginning stages of development or adjustment, such as the first months of life or a new position.

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Infancy

The period in human development from birth to around 2 years of age, characterized by rapid physical and cognitive growth.