Question

question about shareholder stock basis for S Corp ( I am the only owner of the S Corp)

Forum|Forum|2 years ago
February 23, 2024
1 reply
0 views

Last year, the ordinary business income for my S Corp was $50000 which was passed through to my personal income in K-1. Why does $50000 appear as shareholder stock basis for this year in TurboTax Business? I thought the shareholder stock basis should be 0 for this year since the income of the S Corp for last year has been passed to myself.

TurboTax Business Windows

M

Mike9241

your basis is any capital you contributed + any undistributed income. income is not distributed because it is reported on reported on your return. it only is distributed when the S-Corp makes a distribution of cash or property to you.

look at the S-corp's schedule L at the beginning of the year. What's the total line 19 plus the total for lines 22 through 26. that's likely your tax basis at the beginning of the year. Any distributions in 2022 reducing your basis would appear on the k-1 line 16 and would also show in the M-2 column a line 7

N

NihaoAuthor

I guess I made a small mistake not declaring the distribution of $50000 on line 16 of K-1 last year. But I guess this is not a fatal error since tax has been paid on personal level, right?

how to remedy it for this year? Can I just manually change the shareholder beginning base from $50000 to $0 for this year? I am the only shareholder of the S corp.

Rick19744

I found the following from IRS site 'If a shareholder receives a non-dividend distribution from an S corporation, the distribution is tax-free to the extent it does not exceed the shareholder's stock basis.'

So, I will distribute $50000 to myself this year since beginning share basis is $50000, instead of amending last year's tax. Certainly I will also distribute new income from this year.

hope it is OK

Final comments:

Don't disagree at all with what the IRS website says. However, we don't know what else is on the K-1; such as separately stated items.
As noted previously, correcting an omission of prior year distributions and including them in the current year is not the technically correct method to fix your issue; for either the corporate return of your personal return. Just keep that in mind.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.