Jenny Corporation (an S Corporation) is owned entirely by Craig. At the beginning of 2010, Craig's adjusted basis in his Jenny Corporation stock is $20,000. Jenny reports ordinary income of $5,000 and a capital loss of $10,000. Craig received a cash distribution of $35,000 in November 2010. What is Craig's gain from the distribution?
In this case, the beginning basis and current year income would be added for a total of $25,000 (20,000 + 5,000 = 25,000). In this situation the distribution would come next, before the capital loss. The, distribution was $35,000 and creates a taxable gain of $10,000 (25,000 - 35,000 = -10,000).
What happen to the capital loss? Can it only off set with capital gains vs. distributions and if so is it carried forward or separately stated on K-1?
In this case, the beginning basis and current year income would be added for a total of $25,000 (20,000 + 5,000 = 25,000). In this situation the distribution would come next, before the capital loss. The, distribution was $35,000 and creates a taxable gain of $10,000 (25,000 - 35,000 = -10,000).
What happen to the capital loss? Can it only off set with capital gains vs. distributions and if so is it carried forward or separately stated on K-1?