Question

essica is a one-third owner in Bikes-R-Us, an S corporation that experienced a $45,000 loss this year (year 1). If her stock basis is $10,000 at the beginning of the year, how much of this loss clears the hurdle for deductibility (assume the at-risk limitation equals the tax-basis limitation)

Answer 1

$10,000

Step-by-step explanation:

Calculation to determine how much of this loss clears the hurdle for deductibility

Amount allocated = ($45,000 x 1/3)

Amount allocated=$15,000 of loss

Since the amount Allocated is loss of $15,000 and her STOCK BASIS is the amount of $10,000 at the beginning of the year which means that she is allowed to Deduct only the amount of $10,000 of the allocation which represent the amount of her STOCK BASIS.

Therefore how much of this loss clears the hurdle for deductibility will be $10,000