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Birch Corporation, a calendaryear corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception. Last year, James made a direct loan to Birch Corporation in the amount of $ Birch Corporation has paid the interest on the loan but has not yet paid any principal. Assume the loan qualifies as debt for tax purposes. For the year, Birch experienced a $ business loss.
What amount of the loss clears the taxbasis limitation and what is James's basis in his Birch Corporation stock and Birch Corporation debt in each of the following alternative scenarios?
Note: Leave no answer blank. Enter zero if applicable.
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a At the beginning of the year, James's basis in his Birch Corporation stock was $ and his basis in his Birch Corporation debt was $
tableAmount of loss clearing tax basis limitationBasis in stock,Basis in debt,
