S Corp Calculations
Harriet, Herm, and Ronde formed an S corporation. Harriet and Herm both contributed cash of $39,400 to get things started. Ronde contributed land with a basis of $78,800. The land was encumbered by a $54,600 mortgage.
What is Harriet's tax basis
$39,400
Cash contributed $39,400
Max has an initial basis of $33,000
His share liabilities increase by $16,500
Share of income is $7,000
What is his tax basis at end of year?
56,500
beg basis 33,000
+7,000 share of income
+ 16,500 increase in his share of liabilities
End basis 56,000
What is the important rule regarding basis
BASIS CAN NOT BE NEGATIVE
A partner's initial outside basis includes _______ of property contributed to the partnership
Answer: Initial outside basis is based on the adjusted basis of the contributed property.
Vanessa contributed $20,000 of cash and land with a adjusted basis of $40,000 to an S corporation when it was formed. The land was encumbered by a $30,000 mortgage assumed by corporation. What is Vanessa's tax basis in S Corp after formation.
$20,000 cash + $40,000 land − $30,000 mortgage = $30,000.
Alfonso has beg basis of $50,000
During the year, he was allocated $65,000 of partnership ordinary business loss
How much is Alfonso's loss is limited by his tax basis?
Loss limited by his tax basis= 15,000
This is the tax basis a partner has in their partnership interest.
Outside Basis
In an S corporation, what can increase shareholder’s debt basis
Shareholder loans to Corp
Stan owns 100% of an S corp. Has a Beg basis $65,000 and S corp reported the following items:
Ordinary loss $10,000
Interest Income $6,000
Long term $4,000
Shor term capital loss $9,000
What is his end of year basis?
Beginning basis: 65,000
+ Tax-exempt municipal interest income 6,000
+ Long-term capital gain 4,000
− Ordinary loss (10,000)
− Short-term capital loss (9,000)
56,000
A partner has an outside basis of $40,000 beg of year & during the year the partner receives:
$55,000 cash distribution
$10,000 share of partnership ordinary income
What is the partner’s ending outside basis, and how much of the distribution (if any) is taxable gain?
0
Ending basis= 40+10-50=0
5,000 left over from distribution and is taxable
What is a nonrecourse liability?
Only the property securing the loan can be used to repay it — the borrowers are not personally liable.
At the beginning of the year, James's basis in his Birch Corporation stock was $9,900 and his basis in his Birch Corporation debt was $5,950
For the year, Birch experienced a $26,100 business loss.
What amount of the loss clears the tax-basis limitation, and what is James's basis in his Birch Corporation stock and Birch Corporation debt
Amount of loss clearing tax basis limitation $15,850
Basis in stock $0
Basis in debt $0
Hilary's beginning outside basis was $21,000. During the year, she had:
What is end of year basis?
$1,000
$21,000 + $16,000 + $14,000 − $21,000 − $29,000=$1,000
For which of the following entities is the owner's basis increased by the owner's share of profits and decreased by the owner's share of losses but is not affected by the entity's bank loan increases or decreases?
A. Option A. Partnership.
B. Option B. C corporation.
C. Option C. Limited liability company.
D. Option D. S corporation.
Answer:
Choice "D" is correct. The owner's basis in an S Corporation is increased by the owner's share of profits and decreased by the owner's share of losses. It is not affected by any bank loans increased or decreased by the corporation. The S corporation shareholder only has debt basis in direct loans made to the corporation by the owner.
When an S corporation shareholder receives a distribution that exceeds stock & debt basis, this type of income causes what?
Capital Gain on the excess
Sandy is the sole shareholder of Swallow, an S corporation. Sandy's adjusted basis in Swallow stock is $60,000 at the beginning of the year. During the year, Swallow reports the following income items:
Ordinary income 30,000
Tax-exempt income 5,000
Capital gains 10,000
In addition, Swallow makes a nontaxable distribution to Sandy of $20,000 during the year. What is Sandy's adjusted basis in the Swallow stock at the end of the year?
Initial basis (or beginning of year amount) 60,000
Additional contributions $0
Taxable and tax-exempt income items (separately and non-separately stated) 45,000
Distributions to shareholders (20,000)
Nondeductible expenses (0)
Loss or expense items (0)
Ending basis 85,000
Gerald contributes building (basis $15,500, FMV $31,000) with a $9,300 mortgage assumed by Partnership; His interest is 1/3. What is his outside basis?
9300
[$15,500 − $9,300 + ($9,300 × 33%)].
Where is the partner's tax basis in K1 1065 Form
its separately stated on the K1
Combine capital account and the difference in liabilities.
An S corporation shareholder’s stock basis is reduced first by distributions, then by losses and deductions, and any remaining excess loss is suspended FIRST at the shareholder’s ______ basis
stock/stock basis