Agustina, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation several years ago. While Agustina and Bobby activel
Agustina, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation several years ago. While Agustina and Bobby actively participate in running the company, Claudia has a separate day job and is a passive owner. Consider the following information for 2024:
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• As of January 1, 2024, Agustina, Bobby, and Claudia each have a basis in Lafter stock of $15,000 and a debt basis of $0. On January 1, the stock basis is also the at-risk amount for each shareholder.
\r\n• Bobby and Claudia also are passive owners in Aggressive LLC, which allocated business income of $14,000 to each of them in 2024. Neither has any other source of passive income (besides Lafter, for Claudia).
\r\n• On March 31, 2024, Agustina lends $5,000 of her own money to Lafter.
\r\n• Anticipating the need for basis to deduct a loss, on April 4, 2024, Bobby takes out a $10,000 loan to make a $10,000 capital contribution to Lafter. Bobby uses his automobile ($12,000 fair market value) as the sole collateral for his loan (nonrecourse).
\r\n• Lafter has an accumulated adjustments account balance of $45,000 as of January 1, 2024.
\r\n• Lafter has C corporation earnings and profits of $15,000 as of January 1, 2024.
\r\n• During 2024, Lafter reports a business loss of $75,000, computed as follows:
\r\nSales revenue $90,000
\r\nCost of goods sold (85,000)
\r\nSalary to Agustina (40,000)
\r\nSalary to Bobby (40,000)
\r\nBusiness (loss)($75,000)
\r\n• Lafter also reported $12,000 of tax-exempt interest income.
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a. What amount of Lafter’s 2024 business loss of $75,000 are Agustina, Bobby, and Claudia allowed to deduct on their individual tax returns? What are each owner’s stock basis and debt basis (if applicable) and each owner’s at-risk amount with respect to the investment in Lafter at the end of 2024?
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