Mario and Alexa each own 50% of Kinetic Corporation, an S corporation. Both individuals actively participate in Kinetic's business. On January 1, Mario and Alexa have adjusted bases for their Kinetic stock of $81,000 and $87,000, respectively. During the current year, Kinetic reports the following results:

Ordinary Loss: $170,000

Tax-Exempt Internet Income: $21,000

Long-Term Capital Loss: $30,000

Kinetic's balance sheet at year-end shows the following liabilities: accounts payable, $99,000; mortgage payable, $26,000; and note payable to Alexa, $7,000.

1. What income and deductions will Mario and Alexa report from Kinetic's current year activities?

Begin by calculating the loss limitation for Mario and Alexa. ( Complete all answer boxes. Enter a “0” for any zero amounts.)

Mario Alexa

Beginning stock basis $ $

? (use list to left) $ $

Stocks basis before losses $ $

? (use list to left) $ $

Loss limitation $ $

2. What is Mario's stock basis on December 31?
3. What are Alexa's stock basis and debt basis on December 31?
4. What loss carryovers are available for Mario and Alexa?
5. Explain how the use of the losses in Part a would change if instead Kinetic were a partnership and Mario and Alexa were partners who shared profits, losses, and liabilities equally.