Question

Spence, Inc., a calendar year S corporation, generates an ordinary loss of $110,000 and makes a distribution of $140,000 to its sole shareholder, Storm Nelson. Nelson's stock basis and AAA at the beginning of the current year are $200,000. Complete the memo to your senior manager, Aaron McMullin, discussing the tax treatment of Spence's activities. If an amount is zero, enter "0". TAX FILE MEMORANDUM Date: October 3, 2019 Re: S corporation losses and distributions

Answer 1

Answer:

Explanation:

Beginning stock = 200,000

Less current year distribution= 140,000

Basis before loss= 60000

Less partial loss= 60000

Ending stock basis = 0

Suspended loss =0