On January 2, 2018, David Loans His S Corporation $10,000

question 114

Multiple Choice

On January 2, 2018, David loans his S corporation $10,000. By the end of 2018 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2019, the company's operating income is $10,000. The company makes 2019 distributions to David of $11,000. David reports a(n) :

• A) $1,000 LTCG.
• B) $3,000 LTCG.
• C) $11,000 LTCG.
• D) Loan basis of $10,000.