Suppose at the Beginning of 2016, Jamaal's Basis in His

question 51

Multiple Choice

Suppose at the beginning of 2016, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2016, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?

• A) $10,000.
• B) $27,000.
• C) $37,000.
• D)$40,000.
• E)None of these

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Definitions:

Investing Activity

Transactions involving the purchase and sale of long-term assets and other investments not considered as cash equivalents.

Interest

Payment for the use of another person’s money.

Bonds Payable

Bonds payable refers to long-term debt instruments issued by a company to investors, promising to pay back with interest at specified maturity dates.

Operating Activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.