$!$

Required Information

Problem $22\mathrm{.}57($LO $22-4)($Algo$)$

$[$The following information applies to the questions displayed below.$]$

Birch Corporation, a calendar$-$year corporation, was formed three years ago by its sole shareholder, James, who has

operated it as an $S$ corporation since its inception. Last year, James made a direct loan to Birch Corporation in the

amount of $$6,650.$ Birch Corporation has paid the interest on the loan but has not yet paid any principal. $($Assume the

loan qualifies as debt for tax purposes.$)$ For the year, Birch experienced a $$32,000$ business loss.

What amount of the loss clears the tax$-$basis limitation$,$ and what is James's basis in his Birch Corporation stock and

Birch Corporation debt in each of the following alternative scenarios?

Note: Leave no answer blank. Enter zero If oppllcable.

Problem $22-57$ Part a $($Algo$)$

At the beginning of the year, James's basis in his Birch Corporation stock was $$51,500$ and his basis in his Birch Corporation debt

was $$6\mathrm{.}650.$