Read and analyze this scenario: At the beginning of the current year, Sandy Brewer had a zero basis in her 38 shares of stock in Lindlee, an S corporation, a zero basis in a $5,000 note from Lindlee, and a $7,400 carryforward of a prior year ordinary loss from Lindlee that she was unable to deduct be-cause of the basis limitation. Early in February of the current year, Sandy was notified by Lindlees attorney that the corporation was bankrupt. Consequently, Lindlee was defaulting on its $5,000 debt to Sandy, and Sandys 38 shares of stock were worthless. Describe the consequences to Sandy of the worthlessness of her Lindlee investments (note, stock and loss carryforward). Describe to this client the consequences of the worthlessness of a S-corporations stock. Write it in a memo format in a WORD document and submit it via this link.

Evaluation Criteria:

Demonstrate an understanding of a worthless investment.

Apply the basis limitation on the deduction of S corporation losses

Demonstrate the use of proper English to write a Tax Research Memo

Technical accuracy based on Chapter 10 concepts

Use the tax memo format from Chapter 5 (Summary of Facts, Research Issue, Law and Analysis and Conclusion)