Basis

Question 1

What are the effects of zero basis?

Answer 1

Distributions are taxed as capital gains
Ordinary losses are passed through - they are suspended at s/h lever and carry forward
Schedule K-1 will not track suspended losses. So we must track that to see if TP can deduct losses on their

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Question 2

Discuss shareholder loans to S-Corporatin

Answer 2

Must be bona fide loan status
- - Written agreement - legally enforceable
- Stated interest rate and repayment schedule
Shareholder loan basis is never generated by entity debt to third party like a bank

Question 3

Does NATP have worksheets to track basis

Question 4

Where can you find a basis worksheet

Answer 4

In the K-1 instructions

Question 5

When is a form 7203 required?

Answer 5

Yes if there is a loss. etc….

Question 6

What increase and decreases shareholder basis in S Corp

Answer 6

Initial Basis:
Add: Ordinary Income
Tax Exempt Income / Non Taxable Income
Additional Capital Contributions
Taxable S Corp Distributions
Subtract: Losses (S/H share of losses)
Non-Deductible expenses
Tax Exempt Expenses
Distributions in excess of basis