Stock basis
When Pet Emporium
terminated its S election on August 31, 2019, Chandra had a stock
basis and an at-risk amount of $0. Chandra also had a suspended loss from
Pet Emporium of $9,900.
What amount of the
suspended loss is Chandra allowed to deduct, and what is her basis in her Pet
Emporium stock at the end of the post-termination transition period under the
following alternative scenarios?
(assume Pet Emporium
files for an extension to file its tax returns)?
a. Chandra makes
capital contributions of
$8,350 on August 30,
2020, and
$5,080 on September 14,
2020.
Chandra is allowed
to create a stock basis or do absorb the suspended loss until the end of
the Post-termination transition period. PTTP. This ends on the
later of
1 year after the
last corporate C Corp day - Aug 30
the due date
for filing the return including extensions- September 15
Because Chandra made
13,430 of contributions before September 15 the end of the PTTP she is
allowed to increase her stop basis to 13,430
She is also allowed
to deduct 9,900 suspended loss basis.
This reduces her stock basis in Pet emporium
13,430 - 9,900 = 3,500 for the C Corporation going forward.
|
capital contributions |
8,350 |
|
capital contributions |
5,080 |
|
increase her stock basis to |
13,430 |
|
suspended loss |
-9,900 |
|
stock basis |
3,530 |
b. Chandra makes capital contributions of
$5,900 on September 1, 2020, and
$5,900 on September
30, 2020.
| capital contributions | 5,900 | ||
| capital contributions | 0 | ||
| increase her stock basis to | 5,900 | ||
| suspended loss | -9,900 | ||
| stock basis | 0 |
Because Chandra made 5,900 contributions before September 15 the end of the PTTP she is allowed to increase her stop basis to
She is also allowed to deduct 5,900 out of 9,900 suspended loss basis.
This reduces her stock basis in Pet emporium to 0
for the C Corporation going forward.
When she makes the second contribution on September 30, 2020, she can raise her stock basis to 5,900
c. Chandra makes a capital contribution of $11,800 on August 31, 2020.
| capital contributions | 11,800 | ||
| capital contributions | 0 | ||
| increase her stock basis to | 11,800 | ||
| suspended loss | -9,900 | ||
| stock basis | 1,900 |
Because Chandra made 11,800 contributions before September 15 the end of the PTTP she is allowed to increase her stop basis to 11,800
She is also allowed to deduct 9,900 out of 11,800 suspended loss basis.
This reduces her stock basis in Pet emporium to 1,900
for the C Corporation going forward.
d. Chandra makes a capital contribution of $11,800 on October 1, 2020.
Because Chandra made 11,800 contributions before October 1 the end of the PTTP she is allowed to increase her stock basis to 0
She is also NOT allowed to deduct 9,900 out of a suspended loss basis.
This reduces her stock basis in Pet emporium to 0
for the C Corporation going forward.
Comments
Post a Comment