1. What is S Corporation Shareholder Basis?

S Corporation shareholder basis represents the owner's investment in the corporation for tax purposes. It determines the amount of losses that can be deducted and the tax treatment of distributions from the corporation.

2. How Does the Basis Calculation Work?

The calculator uses the S Corporation basis formula:

Where:

• Initial Investment — Cash and property contributed to the corporation
• Income — Share of S Corporation taxable income
• Losses — Share of S Corporation losses and deductions
• Distributions — Cash and property distributed to shareholder

Explanation: The basis calculation tracks the shareholder's economic investment in the S Corporation, which affects loss deductions and distribution taxation.

3. Importance of Basis Calculation

Details: Accurate basis calculation is crucial for determining deductible loss limits, avoiding taxable distributions, and maintaining proper tax compliance for S Corporation shareholders.

4. Using the Calculator

Tips: Enter all amounts in dollars. Include initial capital contributions, annual income/loss allocations, and any distributions received. All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: Why is shareholder basis important?
A: Basis determines how much loss can be deducted each year and whether distributions are taxable or return of capital.

Q2: What happens if basis reaches zero?
A: Losses in excess of basis cannot be deducted currently and must be carried forward until basis is restored.

Q3: How often should basis be calculated?
A: Basis should be calculated annually, typically at year-end for tax reporting purposes.

Q4: What items increase shareholder basis?
A: Basis increases with capital contributions and share of corporate income items.

Q5: What items decrease shareholder basis?
A: Basis decreases with distributions and share of corporate losses and deductions.