At the beginning of the current year, Corporation M had a $50,000 basis in its 50% interest in the M&N Partnership. For the year, M&N incurred a $168,000 net operating loss and received $20,000 of dividend income. M’s share of the partnership’s debts decreased by $6,000 the year. The partnership made no distributions to its partners. Based on these facts, what amount of M&N’s net operating loss may M recognize during the current year? 

a. $44,000 ordinary loss 

b. $50,000 ordinary loss 

c. $64,000 ordinary loss 

d. $70,000 ordinary loss

An S corporation shareholder's basis may be affected by some or all business liabilities

a. Never

b. Because the basis is increased by the amount of debt directly owed by the S corporation to the particular shareholder when there is a net loss allocated to that shareholder

c. Because the basis is increased by the shareholder's share of all business liabilities

d. When there is AEP from C corporation years