Liquidating and non liquidating distributions

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Since losses flow through on the basis of the percentage of stock ownership, acquisition of additional stock will also increase the shareholder's proportionate amount of losses.

In addition, a loan from a shareholder to the corporation gives basis to the lending shareholder.

Basis Computations During a Loos Year A net loss (not including distributions) first reduces the basis for stock, and then reduces the basis of debt owed to the shareholder by the corporation, if any.

Under the proposed regulations, a shareholder's stock basis at the end of a current year that is available to absorb losses is increased by the amount of the shareholder's share of the corporation's separately and non-separately stated income items.

Is it sufficient for S corporation shareholders to maintain basis by the various blocks of stock purchased?

Although not answered directly, the proposed regulations are developed within a context that would require shareholders to separately maintain basis for each share of stock held.

Distributions in excess of basis are treated as gains from the sale of stock.During 1992, she received salary payments from Giant of ,000 (including her portion of the health insurance premiums) and ,000 of cash distributions.Results of operations for 1992 for tax purposes are presented in Table 1.Capital contributions by shareholders to the corporation; b.Separately stated income items (whether taxable or not); c. Excess of depletion deductions over basis of property subject to depletion. Non-deductible expenses that are not properly chargeable to a capital account also reduce stock basis; b.

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