[JayG]

Hi. I am using Becker for REG, and I came across the following question.

Stahl, an individual, owns 100% of Talon, an S corporation. At the beginning of the year, Stahl’s basis in Talon was $65,000. Talon reported the following items from operations during the current year:

Ordinary loss $ 10,000

Municipal interest income 6,000

Long-term capital gain 4,000

Short-term capital loss 9,000

The question is to compute the Stahl’s basis at year-end, and below is the explantation that Becker gives:

Beginning basis of $ 65,000 + Income of 6,000 − Ordinary Loss of 10,000 – Net Capital Loss of 5,000 = 56,000 ending basis.

However, I thought that there are no such things as deductible net capital losses (for corporations; individuals can have a net capital loss of up to 3,000). So why does Becker subtract out the net capital loss of 5,000 here?

Thanks,

Jay

[LongShot]

Same reason muni bond interest is included-asking for basis, not for taxable income.

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[Author]

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