On January 1, 2018, Laura Wang Contributed $30,000 Cash in Exchange

On January 1, 2018, Laura Wang contributed $30,000 cash in exchange for 30 shares of stock in Suki Inc., an S corporation. On May 12, Laura loaned $8,500 to Suki in exchange for a 5-year interest-bearing note. Laura's pro rata share of Suki's 2018 ordinary business loss was $34,100, and she received no cash distributions during the year. Assume the excess business loss limitation does not apply. Which of the following statements is accurate?

A) Laura can deduct $30,000 of the loss in 2018. On January 1, 2019, the basis in her Suki stock is zero, and the basis in her Suki note is $8,500.
B) Laura can deduct $34,100 of the loss in 2018. On January 1, 2019, the basis in her Suki stock is $4,400, and the basis in her Suki note is zero.
C) Laura can deduct $34,100 of the loss in 2018. On January 1, 2019, the basis in her Suki stock is zero, and the basis in her Suki note is $4,400.
D) None of the above is accurate.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free