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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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A shareholder purchases 30 percent of the stock of an S corporation

Resolved Question:

A shareholder purchases 30 percent of the stock of an S corporation two-thirds of the way through the year for $20,000. The S corporation incurs an operating loss of $300,000 for the year. What is the amount that the shareholder may deduct on his personal income tax return, assuming the at-risk and passive activity rules do not apply?
Submitted: 7 years ago.
Category: Tax
Expert:  MequonCPA replied 7 years ago.



In most cases, the shareholder will receive a K-1 reporting a loss of approximately $30,000 ($300,000 * 122/365 * 30%). Regardless of what the K-1 says, the shareholder IS subject to at-risk and passive activity loss rules and will only be able to deduct $20,000 on his return. The balance will be carried forward.

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