**Scenario Analysis: Tax Basis and S Corporation Liability**In this scenario, Ryan is identified as the sole shareholder of an S corporation. Initially, Ryan's tax basis in the corporation's stock is valued at $1,000. Subsequently, the S corporation procures a $400 loan from a banking institution. Importantly, Ryan does not provide a personal guarantee for this loan. The central question posed is: What will Ryan's tax basis be in the S corporation's stock subsequent to the corporation acquiring this liability?When analyzing the impact of non-recourse loans (loans not personally guaranteed by the shareholder) on an S corporation, it's essential to consider whether such liabilities increase the shareholder's tax basis in the stock. Generally, non-recourse loans do not affect the stock basis because the shareholder's securities are not directly at risk.Thus, the answer provided—Ryan's tax basis remains at $1,000—reflects this understanding, as the tax basis in the stock remains unchanged post-incurring the liability.

Given Ryan's tax basis if stock is 1000

Ryan is the sole shareholder of an S corporation. Ryan's tax basis in his stock is $1,000. The S corporation obtains a $400 loan from a bank. Ryan does not guarantee the loan. What is Ryan's tax basis in his S corporation stock after the corporation incurs the liability?

Ryan is the sole shareholder of an S corporation. Ryan's tax basis in his stock is $1,000. The S corporation obtains a $400 loan from a bank. Ryan does not guarantee the loan. What is Ryan's tax basis in his S corporation stock after the corporation incurs the liability?

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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