S Corporations: How to Calculate Shareholder Basis

Overview

A detailed analysis of the calculations related to determining a shareholder's tax basis for S corporation shares and loans, with a focus on how to use Form 1120S, Schedule K-1 information for basis determination. An illustrative example demonstrates how the process works, as well as the many potential pitfalls.

*Please Note:  If you need credit reported to the IRS for this IRS approved program, please download the IRS CE request form on the Course Materials Tab and submit to kori.herrera@acpen.com

Highlights

• Discuss the calculation of basis when the entity is formed including the impact of contributed property
• Explain the importance of shareholder loans to the entity
• Uses a comprehensive example to illustrate the mechanics of the basis determination process
• Discuss how basis is impacted by distributions of corporation property and sale/or liquidation of the S corporation interest
• Explain how S corporation losses impact Form 1040 Schedule E reporting
• Show how to get from the Schedule K-1 information to the basis calculations

Prerequisites

Basic working knowledge of business and S corporation taxation

Designed For

CPAs working in public accounting firms and/or working for S corporations

Objectives

• Identify the tax issues related to S corporation owner's basis for shares and loans from formation through operations and concluding with sale and/or liquidation
• Identify planning opportunities and potential pitfalls

Preparation

None