The beginning basis for debt is the amount the shareholder loaned to the corporation.
Corporate nonliquidating distributions problems carbon dating shroud error repair
Determining Individual Stock Basis As with C corporation stock acquisitions, an S corporution shareholder may have different bases in separately acquired shares of stock.
As a result, the tax treatment of distributions will differ depending on the stock's basis (i.e., a distribution could generate a taxable gain for stock with a low basis, while at the same time be a tax-free retum of capital for stock with a high basis).
What is the January 1, 1993, tax basis for her stock? OPERATINGRESULTS Year Ended December31,1992 Ordinaryincome$188,000 Rentalrealestateloss(37,000) Interestincome8,000 Netlong-termcapitalgain22,000 Charitablecontributions(3,000) Section170expense(7,000) Shareholder'sportionofmedicalinsurancepremiums(1,200) Non-deductibleportionofcorporationmealsand entertainmentexpense(6,000) Keypersonlifeinsurancepremiums(9,000) Even though the nondeductible items do not reduce Linda's current taxable income from the corporation, they do reduce her stock basis.
Her current taxable income from the corporation would be $207,700.
Capital contributions by shareholders to the corporation; b.
Separately stated income items (whether taxable or not); c. Excess of depletion deductions over basis of property subject to depletion. Non-deductible expenses that are not properly chargeable to a capital account also reduce stock basis; b.
The shareholder's oil and gas depletion deduction; c. Non- separately computed losses that pass through; and e. Reducing stock basis for non-deductible items prevents a shareholder from converting a non-deductible expense at the corporate level into a deductible expense when stock is sold or a liquidating distribution is received.
Distributions in excess of basis are treated as gains from the sale of stock.
The amount of the tax basis determines the tax treatment of such items as flow-through losses and corporate distributions.