[Anonymous]

NINJA Question –

Hey guys, I came across this question in Ninja MCQ:

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?

A. $50,000

B. $55,000

C. $56,000

D. $61,000

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Does anyone know why the answer is C but not D? I thought capital losses are deducted to the extent of capital gains and they’re carried back 3 years and forward 5 years.

[Danime]

I think It's because they are asking what the shareholder's basis at year-end would be, not what the tax would be based on. You would have to account for the LTCG and STCL in determining his basis.

65,000-10,000+6,000+4,000-9,000 = 56,000

FAR 5/31/14 - 86
AUD 7/28/14 - 94
REG 10/1/14 - 89
BEC 11/10/14 - 88

[Evwy_Mom]

I think Danime is right. You wouldn't use the capital loss against income in the current year, but you would use it to calculate basis.

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Anonymous]

Thank you all 🙂

[Author]

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