[1] On December 31, Year 1, Mr. Vear purchased 50% of S corporation Zs only class of stock outstanding for $100,000. Z is an electing S corporation. On November 30, Year 2, he purchased the other 50% of its stock for $100,000. For Year 2, Z Corporation had an ordinary loss of $255,500. How much of the loss can Mr. Vear deduct on his individual income tax return for Year 2?

A.		$127,750
B.	$138,600

C.	$233,800
D.	$255,500

[ 2 ] Magnolia Corporation, a calendar-year S corporation, was formed on January 1, Year 1. Kathy owns 25% of Magnolias outstanding stock, which she purchased for $20,000. In Year 1, Kathy guaranteed a corporate loan for $40,000. In Year 2, Kathy made payments on the loan totaling $10,000. Magnolia had losses of $90,000 and $60,000 in Year 1 and Year 2, respectively. What is the amount of the unallowed loss that Kathy can carry over to Year 3?

A.		$0
B.	$7,500

C.	$10,000
D.	$17,500

[ 3 ] XYZ Corporation is a qualified S corporation. In 2016, its books and records reflected the following transactions:

Business income	$500,000
Real estate rental loss	$(20,000)
Interest income	$5,000
Salaries and wages	$(50,000)
Depreciation (without Section 179 expense)	$(40,000)
Section 179 expense	$(10,000)
Other business deductions	$(300,000)

What is XYZs ordinary income (loss) to be reported on its 2016 Form 1120S?

A.		$85,000
B.	$110,000

C.	$115,000
D.	$105,000

Fact Pattern: Day Corporation, an S corporation, reported a $73,000 ordinary loss for Year 1 (a non-leap year). Day uses the calendar year as its taxable year, as do all of its shareholders. Individual B owns 25% of the Day stock at all times during Year 1. Bs basis in his Day Corporation stock at the beginning of Year 1 was $10,000. B materially participates in Days business. At the end of Year 1, Day is liable for the following:

Third-party creditors	$15,000
Individual B	3,000
Other shareholders	9,000

[4] What amount of Days losses may be deducted by B in Year 1, and what amount of Days losses can be carried over by B to Year 2?

A.		Deducted, $18,250; carryover, $0.
B.	Deducted, $13,000; carryover, $0.

C.	Deducted, $13,000; carryover, $5,250.
D.		Deducted, $18,000; carryover, $250.