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Read and analyze this scenario: At the beginning of the current year, Sandy Brewer had...

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Accounting

Read and analyze this scenario:

At the beginning of the current year, Sandy Brewer had a zero basis in her 38 shares of stock in Lindlee, an S corporation, a zero basis in a $5,000 note from Lindlee, and a $7,400 carryforward of a prior year ordinary loss from Lindlee that she was unable to deduct be-cause of the basis limitation. Early in February of the current year, Sandy was notified by Lindlees attorney that the corporation was bankrupt. Consequently, Lindlee was defaulting on its $5,000 debt to Sandy, and Sandys 38 shares of stock were worthless.

Describe the consequences to Sandy of the worthlessness of her Lindlee investments.

Describe to this client the consequences of the worthlessness of a S-corporations stock.

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