What is S corporation shareholder basis?
In short
An S corporation shareholder's stock basis increases with contributions and their share of income, and decreases with distributions, nondeductible expenses and losses. Losses are deductible only up to stock basis plus debt basis.
Key takeaways
- Basis is adjusted in this order: increases, then distributions, then nondeductible expenses, then losses.
- Debt basis comes only from loans the shareholder made directly to the corporation; guaranteeing a bank loan doesn't count.
- Losses that exceed basis are suspended and carried forward indefinitely.
Where it's tested
REG: S Corporation Taxation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
How does an S corporation shareholder's stock basis differ from a partner's basis in a partnership with respect to entity-level debt?