Spence, Inc., a calendar year S corporation, generates an ordinary loss of $110,000 and makes...
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Accounting
Spence, Inc., a calendar year S corporation, generates an ordinary loss of $110,000 and makes a distribution of $140,000 to its sole shareholder, Storm Nelson. Nelson's stock basis and AAA at the beginning of the current year are $200,000. Complete the memo to your senior manager, Aaron McMullin, discussing the tax treatment of Spence's activities. If an amount is zero, enter "O". TAX FILE MEMORANDUM Date: October 3, 2018 Re:S corporation losses and distributions S corporation tax law now provides that distributions are treated as reductions of stock basis considering any losses. Thus, Storm Nelson should treat the loss and distribution as follows. Nelson's beginning stock basis Less: Current-year distributions Basis before loss Less: Partial loss Ending stock basis Susnended loss
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