Paul owns? 100% of Coleman ?Corporation, an S corporation. Paul has a $ 105,000 stock basis on January 1. Paul actively participates in Coleman?'s business. Coleman?'s operating results were not good in the current? year, with the corporation reporting an ordinary loss of $ 160,000. The size of the loss required Paul to lend Coleman $ 53,000 on August 10 of the current year to provide funds needed for operations. The loan is secured by a Coleman Corporation note. Coleman rebounds during the next year and reports ordinary income of $ 54,000. Coleman repays the $ 53,000 note on December 15.
A. What amount of Coleman’s current year loss can Paul deduct on his income tax return?
B. What is Paul’s basis for the Coleman stock and note at the end of the loss year?
C. What income and deductions will Paul report next year from Coleman’s activities and the loan repayment?