[ironryanis]

Can someone please tell me why the answer to this question is $4000.. Does not Capital gains losses affect basis?

Baker, an individual, owned 100% of Alpha, an S corporation. At the beginning of the year, Baker’s basis in Alpha Corp. was $25,000. Alpha realized ordinary income during the year in the amount of $1,000 and a long-term capital loss in the amount of $3,000 for this year. Alpha distributed $30,000 in cash to Baker during the year. What amount of the $30,000 cash distribution is taxable to Baker?

Answer: $4000

AUD 91
FAR 80
BEC 79
REG 84

[Mika]

Let me give you an example to confuse you even more

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

What was Stahl's basis in Talon at year-end?

Stahl's basis in Talon at year-end is computed as follows:

Basis at beginning of year $65,000

Ordinary loss -10,000

Municipal interest income 6,000

Long-term capital gain 4,000

Short-term capital loss – 9,000

Basis at end of year $56,000

REG - 80 (02/13/2015) Roger + Ninja Flash Card + Ninja MCQ + Becker's Note
FAR - 84 (05/29/2015) Roger + Ninja MCQ + Some Wiley book questions
BEC - 77 (08/27/2015) Roger + Ninja MCQ + Half Wiley book questions
AUD - 87 (08/28/2015) Roger + Ninja MCQ + Half Wiley book questions

[State Aggie]

If a shareholder is allocated an item of S corporation loss or deduction, the shareholder must first have adequate stock and/or debt basis to claim that loss and/or deduction item. The $3,000 loss is suspended until there is more basis in the future.

BEC - 87
AUD - 74, 92
REG - 82
FAR - 65, 85

[Gabe]

So it'd be

$25k

+ 1

<30>

= <4>

Basis can't be negative, so to get to zero, you can take $4 of $30 distribution, rest is CF.

What are you having trouble with @Mika?

CPA, CFE
CISA- Experience will be completed by August 2016

[ironryanis]

Thanks everyone. I got it..

AUD 91
FAR 80
BEC 79
REG 84

[Author]

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