Question

Citrus Corporation is a calendar year S corporation with the following
current year information:
Operating loss
Liabilities:
$(2,160,000)
Notes payable, Big Apple Bank
360,000
Notes payable, Grapefruit (individual) 360,000
On January 1, Orange (an individual) bought 50% of Citrus Corporation
stock for $540,000. How much of the operating loss may Orange deduct
currently? Assume the excess business loss limitation does not apply.

Answer 1

The amount of the operating loss may Orange deduct currently will be $108000.

How to illustrate the information?

It should be noted that the operating loss of a company occurs when the company's operating expenses are more than the gross profit.

The following are given in the information:

Operating loss $(2,160,000)

Notes payable, Big Apple Bank 360,000

Notes payable, Grapefruit (individual) 360,000

Also, it was stated that Orange (an individual) bought 50% of Citrus Corporation stock for $540,000.

Therefore, the amount in this scenario will be:

= 50% × $2160000

= $108000

In conclusion, the amount of the operating loss may Orange deduct currently will be $108000.

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