Corporate nonliquidating distributions
The stock basis is reduced by the amount of any separately or non-separately stated loss items.Finally, the tax effect of any distributions the shareholder received during the year is determined.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.Determining Individual Stock Basis As with C corporation stock acquisitions, an S corporution shareholder may have different bases in separately acquired shares of stock.
The beginning basis for stock is the amount the shareholder invested to obtain the stock.
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.
The shareholder's oil and gas depletion deduction; c. Non- separately computed losses that pass through; and e. Reducing stock basis for non-deductible items prevents a shareholder from converting a non-deductible expense at the corporate level into a deductible expense when stock is sold or a liquidating distribution is received.
Distributions in excess of basis are treated as gains from the sale of stock.