Calculating S Corp Stock and Debt Basis: Avoiding Loss Limitations and Excess Distributions

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, May 11, 2022

Recorded event now available

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Course Materials

This course will provide tax professionals and advisers with the tools and understanding to correctly calculate S corporation shareholders' stock and debt basis and advise clients to avoid adverse tax consequences due to loss limitations or excess distributions.

Description

Calculating basis for S corporation shareholders is a time-consuming exercise for tax professionals. Accurately calculating basis is critical to determine how much a shareholder can withdraw in distributions without recognizing taxable income. When a shareholder takes distributions exceeding his basis, the excess distribution is taxable as a capital gain.

Tracking basis is also essential in determining whether shareholders can deduct S corporation losses on their personal returns. Available losses are limited to basis and specific ordering rules govern how basis is utilized.

Recently released in draft form and soon to be required, Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations, will replace the varying basis schedules included in tax returns by tax practitioners and aid the IRS in examining basis and debt discrepancies.

Listen as our experienced panel of tax professionals provides a detailed roadmap of calculating stock basis, debt basis, and the interrelation of distributions to basis, as well as best practices to help S corporation shareholders avoid unnecessary tax.

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Outline

  1. Mechanics of calculating stock basis
  2. Items that increase stock basis
  3. Items that decrease stock basis
  4. Ordering rules
  5. Tracking basis against distributions to avoid current double taxation
  6. Preparing for new Form 7203
  7. Loss limitation rules
  8. Debt basis rules and calculations
  9. Basis strategies for end of business

Benefits

The panel will review these and other key issues:

  • Calculating and maintaining accurate S corp stock and debt basis
  • Understanding basis items specific to S corporations
  • Applying loss limitation rules
  • Preparing for New Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations
  • Calculating basis with a view toward sale, liquidation, or redemption

Faculty

Barnett, Robert
Robert S. Barnett, JD, MS (Taxation), CPA

Partner
Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Daiell, Katy
Katy Daiell, CPA, MST

Partner
Marcum

Ms. Daiell is a partner in the Firm’s Boston Office and is a member of the Firm’s Corporate Tax Services...  |  Read More

Farrington, Douglas
Douglas J. Farrington

Office Managing Partner
Marcum

Mr. Farrington s the Firm’s office managing partner in Boston, Massachusetts and the partner-in-charge of the...  |  Read More

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