Suppose that at the beginning of 2019 jamaal's basis in his s corporation stock was $36,000 and jamaal has directly loaned the s corporation $9,830. during 2019, the s corporation reported an $92,500 ordinary business loss and no separately stated items. how much of the ordinary loss is deductible by jamaal if he owns 50 percent of the s corporation?

Answer and Explanation:

Since Jamaal owns 50% of the S corporation so $92,500 x 50% = $46,250.

However, this loss would offset both the stock basis and debt basis. And this cannot go below zero.

Explanation:

Overall in a scenario such as this one, a firm may continue operating and producing goods if they believe demand may go back up and result in higher returns or if they expect the tastes of consumers to change in the near future. Both of these will in term cause the market sentiment surrounding the firm's product to change and begin seeing more profitable times. Otherwise, a firm would cut their loses and stop operating and producing goods.