Laurie Is a 70% Shareholder in Martin Ltd

question 27

Multiple Choice

Laurie is a 70% shareholder in Martin Ltd.,a calendar year S corporation.As of January 1,2012,Laurie's basis in her stock investment was $400,000.During 2012,she made an additional capital contribution to Martin of $90,000 and also loaned the corporation $80,000.During 2012,Martin Ltd.had an operating loss of $900,000.One of the results of these transactions as to 2012 is that:

• A) Laurie can recognize a loss of $400,000.
• B) Laurie can recognize a loss of $490,000.
• C) Laurie can recognize a loss of $630,000.
• D) As of January 1, 2013, Laurie's basis in her stock is a negative $60,000.
• E) None of the above.

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Definitions:

Monopolists

Firms or individuals that are the sole providers of a particular good or service, giving them significant market power.

Price Takers

Participants in a market who accept the prevailing market price because they do not have enough power to influence it.

Market

A place or platform where buyers and sellers come together to trade goods, services, or financial instruments.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market with restrictions on the entry of new firms.