South Corporation, an S corporation, has 800 shares of stock outstanding. Chase and Lucy own an equal number of these shares, and both actively participate in South's business. Chase and Lucy each contributed $68,000 when they organized South on September 9 of Year 1. Start-up losses during Year 1 resulted in South reporting a $220,000 ordinary loss. South's activities have since become profitable, and the corporation voluntarily revokes the S election on March 1 of Year 2, with no prospective revocation date being specified. In Year 2, South reports $336,000 of taxable income ($28,000 per month). South makes no distributions to its shareholders in either year.

Read the requirements.

Requirement a. What amount of loss can Chase and Lucy deduct in Year 1? Lucy Ordinary loss allowed - Year 1 Ask my instructor Chase Requirements a. What amount of loss can Chase and Lucy deduct in Year 1?

b. What amount of loss do Chase and Lucy carry over to Year 2?

c. If Chase reported only $2,000 of other business income in Year 1, what happens to the "excess" deductible S corporation losses? d. What portion of the loss carryover from Part b can Chase and Lucy deduct in Year 2? What happens to any unused portion of the loss? e. What advice can you offer to Chase and Lucy to enhance their use of the South loss? Print Done - X

South Corporation an $ eorpomson, has 900 shares of stock outstanding. Chase and Lucy own an equal number of these shares, and both actively participate in South's businesi Chase and Lucy eoch contrituted \$6R.000 when they organked Bouth on September D of Yoar 1 Start-up losses during Yoar 1 resulted in South reporting a $220. 000 ordinary loss. South's activities have Bead the reduirements Requirements Requirement a. What amount of ioss can Chase and tucy deduct in Year 13 a. What amount of iess can Chase and Lucy deduct in Year 1 ? b. What amount of loss do Chase and Lucy cary over to Year 2 ? c. If Chase repocted only $2,000 of other business income in Year 1 , what happens to the "exciss" deductible 5 corporation lesses? d. What portion of the loss camyover from Part b can Chase and Lucy deduet in Year 27 . What happens to any unused portion of the loss? 4. What advice can yor offer to Chase and Lucy bo entuance their use of bie South loss