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arushi_13
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| Posted: 09 Jul 2009 at 13:36 | IP Logged
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S-corporation
First year was 2008
Capital contributed = 1,000
Liability at year end (credit card debt) = 9,000
2008 operating loss = 7,000
What is the amount of loss to be reported on the single shareholder's K-1?
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roswellpodsquad
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| Posted: 09 Jul 2009 at 14:31 | IP Logged
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Assuming they are a 100% shareholder, then only $1,000 would be
reported are the shareholder's K-1.
Remember for S Corp shareholders losses are limited to the shareholder's
basis in the entity plus any direct shareholder loans. For S-Corporations
basis is NOT increased by the shareholders share of liabilities assumed.
So, since they contributed $1,000 at the beginning of the year & there are
not additional increases or decreases to the account, the shareholders
ending capital account = their ending basis in this situation. Thus, the
shareholders reported loss is limited to the $1,000.
Hope that helps.
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arushi_13
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Thanks a lot for the detailed explanation. It really helped.
If you don't mind my asking which book did u refer. Your concepts are lucid and I m sure u must have done well on the exam.
Any particular advise you would give for the exam takers?
Thanks again for all your help and good luck for your result.
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arushi_13
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Another Q..
What happens when the 100% shareholder personally guarantees a bank loan made to the corp....will it be added to his basis?Will it be regarded as a recourse debt?
Thanks for your help.
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roswellpodsquad
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I used the 2009 version of Becker.
As for the exam, I just kept going over and over the information until I
felt comfortable with the concepts. I did all the homework/supplemental
reading and used the IRS website to clear up any questions I felt my text
was week on. Also do as many questions as you can. I did all my Becker
questions about 5-7 times. I'd would also go through all the answer
choices and make sure I understood why the correct answer was correct
& why the incorrect choices were wrong. Although some people will tell
you not to do the AICPA released questions, I disagree. This is where
many of the CPA review questions pull their homework questions from.
Hope that helps.
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