Shareholder tax basis

Technical topics regarding tax preparation.
#21
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What do you mean when you say a shareholder "has never secured a loan (or other liability) directly to the corp from an unrelated party"?

Still waiting for a response to my #16...
 

#22
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Is the S corporation allowed to have accrued during the year an expense that remains unpaid at yearend?

Or would that be an instance of the shareholder having "secured a loan (or other liability) directly to the corp from an unrelated party"?
 

#23
makbo  
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I interpreted the OP as a question about whether there is a "simple" case where "we do not need to go back to all his prior year tax returns to make the determination."

The OP gave a very sketchy "simple case" to illustrate his question, but I did not see it as an attempt to fully define or account for all the rules that affect basis calculations. In particular, there was a "zero basis at the beginning of the year" factor that needlessly confused the illustration, IMO. Therefore, my focus in this discussion is to see if, indeed, we can come up with a simple case where it is not necessary to go back to year 1.

So, given that I am not trying to account for complex cases including outside basis, loans other than shareholder loans to the corp, and so forth, I have no comments at this time on those issues.

My version of the OP goes like this: suppose the sole shareholder of an S-corp, who has always been the sole shareholder, runs his business similar to a sole proprietor, in that the only money that has ever come into the corp, other than gross revenues, is from his own stock purchases, his own loans to the corp, and/or his own APIC or whatever you want to call it. Cash method of accounting. All tax liabilities, retirement plan contributions, and the like are paid without any delay (so no year-end accrual of such amounts).

By examining the beginning of year balance sheet, would it not be possible to establish tax basis for this shareholder? I think so, but am asking because not 100% certain.
 

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