Do You Know Your Basis in Your S Corporation?

Do you know your shareholder basis in the stock of your S corporation?  It is your responsibility, and not that of the corporation, to track your stock and debt basis in the business.  Why is this important?  If you as a shareholder are allocated an S corporation loss or deduction flow-through, you must first have sufficient stock and debt basis to claim that loss or deduction.  If you know before year end that you do not, you may be able to increase your basis in order to absorb the loss on your current year’s tax return.  To learn how to calculate your shareholder basis in an S corporation, see the article, “Calculation of Shareholder’s Stock and Debt Basis in S Corporation“.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
This entry was posted in Articles and tagged , , . Bookmark the permalink.

One Response to Do You Know Your Basis in Your S Corporation?

  1. Mark Wilkins says:

    Dear Mr Brighenti:

    I have been reading your web site regarding S-Corp stock basis and
    wondered if you could answer a question.

    If Schedule M-2 shows let’s say $8,000 in accumulated basis at the end of
    2010 then would that be my basis in the S-Corp stock? The S-Corp was
    closed out on 12-31-2010 with no assets and I wanted to know if a loss
    could be taken on Schedule D.

    Thank You,
    Mark Wilkins

Leave a Reply to Mark Wilkins Cancel reply

Your email address will not be published. Required fields are marked *