McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 24

{Research} Timo is the sole owner of Jazz Inc. an S corporation.On October 31 2011, Timo executed an unsecured demand promissory note of $15,000, and he transferred the note to Jazz (Jazz could require Timo to pay it $15,000 on demand).When Timo transferred the note to Jazz, his tax basis in his Jazz stock was zero.On January 31, 2012, Timo paid the $15,000 to Jazz as required by the promissory note.For the taxable year ending December 31, 2011, Jazz incurred a business loss of $12,000.How much of the loss clears the stock and debt basis hurdles for deductibility?