Answer:
1. Share of Ann's Loss: $31,048
2. Share of Becky's Loss: $60,000
3. Maximum Loss Allowed: $41,300
Explanation:
The total loss for the year is $120,000 and both Ann and Becky own 50% each.
1. Share of Ann's Loss:
Ann had ownership of Whitman Inc. for 189 days which means the 50% of the total loss would be further lessened by 189/365 factor.
Mathematically:
Ann's Loss = $1,20,000 * 50% * (189/365) = $31,048 Loss
2. Share of Becky's Loss:
This means that the share of loss for Becky would be = $120,000 * 50%
= $60,000
3. Maximum Loss Allowed:
As the stock basis is $41,300, hence the maximum loss for Becky would be $41,300.
