Assuming this is an one shareholder S-corp.
If we add Form 1120-S Schedule M-2 Line 8 (year end balance of the AAA account) to Schedule L Line 22 Capital Stock, are we getting the tax basis of the shareholder?
Harry Boscoe wrote:It's possible, but not certain.
Nilodop wrote:What would be possible situations that may cause a discrepancy?. Maybe he bought the S corp stock from the previous shareholder(s). Or inherited it. Or received it as a gift.
MeaningfulIdea wrote:Nilodop wrote:What would be possible situations that may cause a discrepancy?. Maybe he bought the S corp stock from the previous shareholder(s). Or inherited it. Or received it as a gift.
It will be fine then. I know he purchased the business from someone else before and then made it a S-corp.
Terry Oraha wrote:MeaningfulIdea wrote:Nilodop wrote:What would be possible situations that may cause a discrepancy?. Maybe he bought the S corp stock from the previous shareholder(s). Or inherited it. Or received it as a gift.
It will be fine then. I know he purchased the business from someone else before and then made it a S-corp.
Then wouldn’t his basis include what he paid someone else for the business?
What would be possible situations that may cause a discrepancy?
sjrcpa wrote:And, it is the shareholder's responsibility to compute his basis, not the S Corporation's tax preparer's.
CaptCook wrote:UBIA doesn't have anything to do with shareholder stock basis.
Just get his prior K-1s and do the work. Somebody has to have these records.
Nilodop wrote:Client said initially there were two shareholders. Each of them paid $100,000 to buy the business in 2011.. In what form did this "buy the business" occur? I think we lack facts.
Wiles wrote:In the above case (post #14), would the tax basis = $190,000 + Schedule L Line 22 Capital Stock + Schedule M-2 Line 8 AAA account year end balance?
No. First we need to confirm AAA is correct. Then we need to remove the AAA balance that belonged to the prior shareholder.
Also need to remove prior shareholder's share of capital stock.
2011 is not that far back. Can you get all 1120S's and K-1s?
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