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S Corp shareholders loss reporting -ordinary and capital

An individual started an S corporation with $50K initial capital contribution. During the year the business has a ordinary loss of $60K. The owner lended $10K to the coproration to cover the loss. The ordinary loss was reported in schedule K-1 and the shareholder included that in his tax return. The S corporation eventually went out of business and is ready to be dissolved. The question is - can the initial $50K capital conribution be calimed as capital loss in shareholders Schedule D as worthless stocks? How about the $10K shareholders loan? Can it be claimed as a loss to the shareholder?. Since the shareholders basis is zero (50 capital

+10Kloan - 60K ordinary loss), it looks like he can not claim any capital or loan loss. Am I correct?
Reply to
Rashid
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Is this a homework question? ("An individual started an S Corporation" sounds like verbiage from a text book. Also "LENDED"? How about lent?

Has not the loss already been deducted by the stockholder?

If so, do you think he should be able to deduct it twice?

Do you understand the concept of BASIS?

Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

Yes. You already got the full benefit of the loss (as ordinary loss, rather than the less desirable capital loss), so, as you surmise, there is no basis remaining to deduct as a capital loss.

Reply to
Tom Healy CPA

If he has already written off the 60K in losses and his basis is zero, then there is nothing left to write off. Both the stock and loan have zero basis, so you are correct. He has already received the benefits of the write-off's. No double dipping.

Reply to
CMS_VA_CPA

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