on january 1, year 1, radish, an individual, paid $15,000 for 5 percent of the stock in root corp., an s corporation. in november year 1, he loaned $8,000 to root corp. in return for a promissory note. root corp. generated a $600,000 operating loss in year 1. root corp. generated $220,000 ordinary business income in year 2. in year 3, root corp. repaid its $8,000 debt to radish before he restored any basis in the debt.
