Monte and Allie each own 50% of Raider Corporation, an S corporation. Both individuals actively participate in Raider's business. On January 1, Monte and Allie have adjusted bases for their Raider stock of $80,000 and $90,000 respectively. During the current year, Raider reports the following results:
Ordinary loss $175,000
Tax-exempt interest income $20,000
Long-term capital loss $32,000
Raider's balance sheet at year-end shows the following liabilities: accounts payable, $90,000; mortgage payable, $30,000; and note payable to Allie, $10,000.
Question 1: What income and deductions will Monte and Allie report from Raider's current year activities?
Question 2: What is Monte's stock basis on December 31?
Question 3: What are Allie's stock basis and debt basis on December 31?
Question 4: What loss carryovers are available for Monte and Allie?
Question 5: Explain how the use of the losses in Part a would change if instead Raider were a partnership and Monte and Allie were partners who shared profits, losses and liabilities equally.