Liquidating vs nonliquidating distributions partnerships


What is the January 1, 1993, tax basis for her stock? OPERATINGRESULTS Year Ended December31,1992 Ordinaryincome8,000 Rentalrealestateloss(37,000) Interestincome8,000 Netlong-termcapitalgain22,000 Charitablecontributions(3,000) Section170expense(7,000) Shareholder'sportionofmedicalinsurancepremiums(1,200) Non-deductibleportionofcorporationmealsand entertainmentexpense(6,000) Keypersonlifeinsurancepremiums(9,000) Even though the nondeductible items do not reduce Linda's current taxable income from the corporation, they do reduce her stock basis.Her current taxable income from the corporation would be 7,700.

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The amount of the tax basis determines the tax treatment of such items as flow-through losses and corporate distributions.

Many S shareholders have two investments in the corporation - the investment in corporate stock and loans made to the corporation.

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.

Determining Individual Stock Basis As with C corporation stock acquisitions, an S corporution shareholder may have different bases in separately acquired shares of stock.