Question 1

An S Corp shareholder has a beginning stock basis of ,000. During the year, the following occurred (pro-rata share): Ordinary Income ,000; Cash Distribution ,000; Long-Term Capital Loss ,000. What is the shareholder's ending stock basis?

Accepted Answer

S Corp Basis Ordering: 1. Income items. 2. Distributions. 3. Loss/Deduction items. (Note: Partnership is different!).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Deducting losses before distributions (which matters if basis hits zero).

An S Corp shareholder has a beginning stock basis of ,000. During the year, the following occurred (pro-rata share): Ordinary Income ,000; Cash Distribution ,000; Long-Term Capital Loss ,000. What is the shareholder's ending stock basis?

How to approach this question

Full Answer

Common mistakes

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