Question

Kaiwan, Inc., a calendar year S corporation, is partly owned by Sharrod, whose beginning stock basis is $140,000. During the year, Sharrod's share of a Kaiwan long-term capital gain (LTCG) is $21,000, and his share of an ordinary loss is $84,700. Sharrod then receives a $84,000 cash distribution.

Answer 1

Answer:

Sharrod's deductible loss  = stock basis + long term capital gains - cash distribution = $140,000 + $21,000 - $84,000 = $77,000

Sharrod's suspended loss  = share of ordinary loss - deductible loss = $84,700 - $77,000 = $7,700

Sharrod's new basis in Kaiwan stock  = $0

Explanation:

Sharrod's loss cannot be greater than his basis, that is why only $77,000 can be deducted and $7,700 can be carried forward.