Detailed Answer
(b) The requirement is to determine Meyer’s share of an
S corporation’s $36,600 ordinary loss. An S corporation’s items
of income and deduction are allocated on a daily basis to anyone
who was a shareholder during the taxable year. Here, the
$36,600 ordinary loss would be divided by 366 days to arrive at a
loss of $100 per day. Since Meyer held 50% of the S corporation’s
stock for forty days, Meyer’s share of the loss would be
($100 × 50%) × 40 days = $2,000.