Kelly contributed $15,000 cash and tangible property with an adjusted basis of $12,000 and fair market value of $24,000 in exchange for 30 of the 100 outstanding shares of an S corporation. In Year 1, the S corporation entered into a recourse debt agreement for $36,000 and a nonrecourse debt agreement, secured by equipment of the S corporation, for $14,000. In the case of default on the recourse debt, each shareholder is protected by personal liability insurance. What is Kelly's at-risk limitation on losses?

Kelly contributed $15,000 cash and tangible property with an adjusted basis of $12,000 and fair market value of $24,000 in exchange for 30 of the 100 outstanding shares of an S corporation. In Year 1, the S corporation entered into a recourse debt agreement for $36,000 and a nonrecourse debt agreement, secured by equipment of the S corporation, for $14,000. In the case of default on the recourse debt, each shareholder is protected by personal liability insurance. What is Kelly's at-risk limitation on losses?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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