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S-Corp Basis distributions

  • 1.  S-Corp Basis distributions

    Posted 29 days ago

    If a Corporation issues a distribution to its shareholder in excess of his/her stock basis, is it taxable even if he/she has loaned the company,so together including the loan there is still basis?

     

     

     

    2 1

    Hal Martin, CPA
    hmartin@brmcpa.com
    440 Mamaroneck Avenue

    Suite 508
    Harrison, NY 10528
    Phone: (914) 636-7200
    Fax: (914) 636-7705

     

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    AICPA-Web_Member-of_1c

     

     



  • 2.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Hal:

    As long as they have basis in the debt. You then have to reduce the basis in the debt.

    ------------------------------
    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
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  • 3.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Thanks Robert,

    I always thought so......
    We have been digging into this for the new Sch E page two check off compliance and came across some examples that state that distributions cannot be applied against debt basis???  To me it does not make sense.  If true, it seems to be a substance over form issue....I would just make an entry reducing Distributions and increasing Shareholder loan repayment.

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    Hal Martin
    BAND, ROSENBAUM & MARTIN, PC
    Harrison NY
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  • 4.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Hal:

    I make a habit of not posting to an officer loan account, if they are not loans. Call it my paranoia of it being deemed a second class of stock. I also track both stock basis and debt basis on all of my clients.

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    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
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  • 5.  RE: S-Corp Basis distributions

    Posted 28 days ago

    So, I have a taxable income problem....If shareholder distributes, in the current year and it's charged to AAA Distributions, in excess of his stock basis, it's taxable.  Despite the fact he loaned a billion dollars into the S-corp?

     

     

     

    2 1

    Hal Martin, CPA
    hmartin@brmcpa.com
    440 Mamaroneck Avenue

    Suite 508
    Harrison, NY 10528
    Phone: (914) 636-7200
    Fax: (914) 636-7705

     

    Click here to upload secure and encrypted files.

     

    7b24d431-b33f-4266-8e00-6ec431907477   e943ecc8-5be2-4768-a17e-1b829b908afe     image009.png@01D3DE33.D740C180      instagram-icon_128x128

     

      

     

    AICPA-Web_Member-of_1c

     

     






  • 6.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Not at all Hal as you would then reduce his loan basis.

    ------------------------------
    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
    ------------------------------



  • 7.  RE: S-Corp Basis distributions

    Posted 28 days ago
    I really appreciate your responses. So to be clear, distributions can used against the loan basis. 
    My AAA is negative due to large distributions, not losses. 

    Sent from my iPhone





  • 8.  RE: S-Corp Basis distributions

    Posted 28 days ago

    If the corp is an S corp. from inception – then you first look at Stock basis and when that is 0 you next reduce loan basis.  The excess is taxable.  If it has C corp. E&P it is more complicated.  There are 4 steps.

     

    Very truly yours,

     

    ROBERT S. BARNETT

     

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    100 Jericho Quadrangle, Suite 233

    Jericho, New York 11753

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  • 9.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Thanks. Always an Scorp. Just trying to make sure everyone understands that my AAA is negative due to large distributions, not losses.  
    And that I can still use up my loan basis for this situation. 

    Sent from my iPhone





  • 10.  RE: S-Corp Basis distributions

    Posted 28 days ago
    Hal:

    This may help.

    https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-stock-and-debt-basis

    ------------------------------
    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
    ------------------------------