I am a 100% shareholder of Johnson Corp. (an S corporation). At the beginning of 2010, My basis in Johnson Corp. stock was $14,000. During 2010, I loaned $20,000 to Johnson Corp. and Johnson Corp. reported a $25,000 ordinary business loss and no separately stated items. In 2011, Johnson Corp. has reported $8,000 of ordinary business income.
a. How much of the $25,000 ordinary loss allocated to me clears the tax basis hurdle for deductibility in 2010?
b. What is my stock and debt basis at the end of 2010?
c. What is my stock and debt basis at the end of 2011?
a. The loss first uses up all the stock basis of $14,000 and then $11,000 of the debt basis.
b. Stock basis at 12-31-10 is -0-; debt basis is 9,000
c. Stock basis at 12.31.11 is -0-; debt basis is 17,000
Stock basis Debt basis Total basis
The cited solution provides a table that calculates stock and debt basis at December 2010 and 2011 with explanations.