s corp. shareholder stock and debt basis tracking

I have some questions about a new s corp. client's stock and debt basis.
1. in its 2018 tax return, there is no beginning and ending balance for stocks. Is it normal to have such situations? It has only one shareholder. How can I track the shareholder's stock basis going forward?
2. the shareholder from time to time deposit personal funds to the company's business account and also use personal funds to pay some business expenses. Can I treat these as shareholder loans to the s corp.?
3. the shareholder from time to time withdraw funds to personal accounts. Can I treat these as s corp.'s loans to shareholder?
4. IF so, can I net the loans to shareholder and loans from shareholder and put the net into the balance sheet?
5. There is some "loans to shareholder" balance in 2018 tax return, but no "loans from shareholder" balance in the tax return. Can I assume the loan basis of the shareholder is 0 at end of 2018?
Any thoughts will be great appreciate.

There are some tax amateurs who don't do Balance Sheets in the 1120S, shame on them.

But I do what you're thinking about. I keep ONE account for NP-shareholder and use it for all the in's and out's during the year. At year end, I distribute profits to that account....

Now, technically, if you have a note balance over 10k I think it is, you need to assess interest and issue 1099INT. So for single shareholder firms, I'm tending to use their AAA account now instead of a note just to keep life easier. But with more than 1 s/h, you have to keep note accounts to avoid the unequal distribution problems.

Others may differ....lol.

Thank you for your input!

any other thoughts on this topic? Thank you!

I do what JR1 does.

In a single shareholder S-Corp, I net everything and try to run it all through AAA as a distribution. If there is an excess distribution, then I discuss the issue with client and 95% of the time we create a promissory note owed back to the company. If there are net contributions to the company, then we book it as APIC, not as a note payable to the shareholder.

How old is the S corp? This is your chance to get your hands around basis while the omission of that information is the previous CPA's "bad", not your fault. You absolutely must have that data if you are preparing the individual's return. The IRS's additional reporting requirements applicable to partnerships is foreshadowing of things to come for S corporations. Remember, the rule has always been that it is the partner's responsibility to maintain his basis information, but then beginning in 2018, partnerships were required to report negative tax basis capital accounts, and the 2019 K-1s eliminate the choice of methods of maintaining capital account, although the requirement to report tax basis has been deferred. It can't be too long before S corporations are subject to the same sort of requirements.

Long story short, I suggest telling your client that this information is important, the time to figure it out is now, do the calculation, do the balance sheet, and attach the basis calculation to the shareholder's K-1.

How old is the S corp? This is your chance to get your hands around basis while the omission of that information is the previous CPA's "bad", not your fault. You absolutely must have that data if you are preparing the individual's return. The IRS's additional reporting requirements applicable to partnerships is foreshadowing of things to come for S corporations. Remember, the rule has always been that it is the partner's responsibility to maintain his basis information, but then beginning in 2018, partnerships were required to report negative tax basis capital accounts, and the 2019 K-1s eliminate the choice of methods of maintaining capital account, although the requirement to report tax basis has been deferred. It can't be too long before S corporations are subject to the same sort of requirements.

Long story short, I suggest telling your client that this information is important, the time to figure it out is now, do the calculation, do the balance sheet, and attach the basis calculation to the shareholder's K-1.

Thank you for the suggestions! Yes, I will definitely coordinate with the client to catch up with the basis and get things streamlined.

How old is the S corp? This is your chance to get your hands around basis while the omission of that information is the previous CPA's "bad", not your fault. You absolutely must have that data if you are preparing the individual's return. The IRS's additional reporting requirements applicable to partnerships is foreshadowing of things to come for S corporations. Remember, the rule has always been that it is the partner's responsibility to maintain his basis information, but then beginning in 2018, partnerships were required to report negative tax basis capital accounts, and the 2019 K-1s eliminate the choice of methods of maintaining capital account, although the requirement to report tax basis has been deferred. It can't be too long before S corporations are subject to the same sort of requirements.

Long story short, I suggest telling your client that this information is important, the time to figure it out is now, do the calculation, do the balance sheet, and attach the basis calculation to the shareholder's K-1.

Thank you for the suggestions! Yes, I will definitely coordinate with the client to catch up with the basis and get things streamlined.

the client's s corp started in year 2002, long way back and they have not tracked stock and debt basis at all. They can not provide me with all necessary k-1s and other info. to retrieve the basis. How should I deal with this situation? Thank you!

I have this same issue this year with a new client. I was at a CPE class and instructor said if you can't determine basis, that you start with a basis of -0- in the year you begin handling the work. I haven't seen this in writing anywhere, but just passing along what I heard.

I have this same issue this year with a new client. I was at a CPE class and instructor said if you can't determine basis, that you start with a basis of -0- in the year you begin handling the work. I haven't seen this in writing anywhere, but just passing along what I heard.

Thank you for sharing this info. with me!

I have this same issue this year with a new client. I was at a CPE class and instructor said if you can't determine basis, that you start with a basis of -0- in the year you begin handling the work. I haven't seen this in writing anywhere, but just passing along what I heard.

Thank you for sharing this info. with me!

client's s corp is a simple structured one shareholder s corp. client says all past years k-1s only have ordinary income/losses and other items( that do not impact stock basis). 

If this is the case, can I use shareholder's initial capital contribution plus retained earnings on its 2018 year balance sheet as the stock basis as of 2018 and move forward?

for debt basis, the shareholder had personal funds in and out of business account and balance sheets have categorized net personal funds in as loan from shareholder and net personal fund out as loan to shareholders. Is it too simple minded if I use 2018 balance sheet's loan from shareholder as the debt basis of 2018 and move forward? 

I will put a note with the tax return when preparing 2019 1040  to say that these basis calculations may need to be revised when all historical data is available to generate accurate stock and debt basis. 

anyone can comment on this approach? Thank you so much!

For a first year S-Corp that is at a loss of $10k for example, would that qualify as contribution or stock basis of the single shareholder because the expenses of the corp were paid out of the owners pocket, therefore, it is their basis?

Assuming stock basis was zero and the owner paid $10K out of pocket, then a contribution of $10K would be recorded. Could also be a loan. Either way, ending basis is zero.

There are some tax amateurs who don't do Balance Sheets in the 1120S, shame on them.

But I do what you're thinking about. I keep ONE account for NP-shareholder and use it for all the in's and out's during the year. At year end, I distribute profits to that account....

Now, technically, if you have a note balance over 10k I think it is, you need to assess interest and issue 1099INT. So for single shareholder firms, I'm tending to use their AAA account now instead of a note just to keep life easier. But with more than 1 s/h, you have to keep note accounts to avoid the unequal distribution problems.

Others may differ....lol.

Can you elaborate how you do using AAA account for personal funds in and out of the single shareholder's corp.? e.g if the net is personal fund out of the s corp., do you put the net amount in "distributions" line in schedule M-2 of 1120-s? and if the net is personal fund into the s corp., where do you put the net amount in the same schedule? I don't know other tax software, but mine (ATX) does not allow making input into the "distributions" for AAA account in M-2 schedule.
Thank you so much!

Can't help with your software, but I make my AAA Distributions at year end. Until then, all money in and/or out personally goes into a NP-S/h account for tracking. At year end, I'll close any net 'outs' as distributions and report accordingly. If the net is 'in' for some reason...just leave it in the NP.

Can't help with your software, but I make my AAA Distributions at year end. Until then, all money in and/or out personally goes into a NP-S/h account for tracking. At year end, I'll close any net 'outs' as distributions and report accordingly. If the net is 'in' for some reason...just leave it in the NP.

Thank you so much! I recall there is some IRS rules that if the NP to shareholder is over $25,000, there should be some promissory note issued to the shareholder and 1099INT issued to shareholder at year end too. How have you handled this? Any options to avoid this?
Thanks again!

I was very diligent about interest and 1099INT's for many years and still am for multiple s/h's where I have to have two notes to keep AAA in balance with ownership %'s. For a sole owner, I think I only have one with a note that's not likely to get repaid by profits each year, so I do one for him. The rest, I just keep things down in equity...so I guess I will tend to close any net in for a sole s/h to his add'l paid in just to dodge all that nonsense.

I was very diligent about interest and 1099INT's for many years and still am for multiple s/h's where I have to have two notes to keep AAA in balance with ownership %'s. For a sole owner, I think I only have one with a note that's not likely to get repaid by profits each year, so I do one for him. The rest, I just keep things down in equity...so I guess I will tend to close any net in for a sole s/h to his add'l paid in just to dodge all that nonsense.

Thank you so much for your prompt response! Very helpful!!