LO4 Wayne owns 30% of Label Maker Corporation. Label Maker is organized as an S corporation. During 2010, Label Maker has a loss of $160,000. At the beginning of 2010, Wayne’s at-risk amount in Label Maker is $30,000.
a. Assuming that Wayne’s investment in Label Maker is not a passive activity, what is his deductible loss in 2010?
b. In 2011, Label Maker has a taxable income of $50,000. What is the effect on Wayne’s 2011 income?
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