S Corp Stock Basis

[DONNA ASTON]

I need some help on the sale of stock for an s corp client.

Here is the situation:

K-1 with the following numbers:

Ordinary business income (loss): -30189

interest income: 292
unrecaptured sec 1250 gain 872
1231 gain 108,915

Box 16D: 184,114

received check of 213,000

I am having a moment and second guessing the stock basis amount on Sch D of the 1040.

Could someone out there give me a hand and I know we are all swamped but any info would help.

Thanks

[BHoffman]

Hi Donna - this question is probably much too complicated to be answered in a forum. The K1 does not have the information you need to determine the shareholder's stock basis. Did you prepare the 1120S form for the shareholder? If not, you might be able to get a shareholder basis worksheet from the person who did prepare it.

[DONNA ASTON]

Thank you for responding so quickly. No I did not prepare the S corp return and having a hard time due to the client relations with the CPA that did prepare it. I do not have a worksheet with the 2008 ending stock basis and don't know if it is attainable at this point. Any suggesstions.

[BHoffman]

Thank you for responding so quickly. No I did not prepare the S corp return and having a hard time due to the client relations with the CPA that did prepare it. I do not have a worksheet with the 2008 ending stock basis and don't know if it is attainable at this point. Any suggesstions.

Have you looked through the paperwork carefully? Maybe the CPA included the worksheet.

The only way I know is to prepare a worksheet for every year the shareholder owned stock in the SCorp. Here is a link to the instructions for form K1S: The worksheet is on page 2.

http://www.irs.gov/pub/irs-pdf/i1120ssk.pdf

You'll need to be very careful and study hard to understand the things that increase and decrease basis. You'll also need to keep the worksheets as proof of basis should you need to justify your numbers.

[DONNA ASTON]

The inhouse CPA who did not prepare the 1120S is saying there should be a loss on Sch D of the 1040 and the distribution on the K-1 should not be included in calculating stock basis for this client. I was not in agreement because I felt I did not have the pieces to put this together but was seeking other professional opinion. I think at this point this client needs to move on to someone they are will to provide the whole picture to. This is a first year client.

[DONNA ASTON]

I understand the worksheet and have had them provided by the person preparing the corporate tax return or have provided to them. I would still need the proper information to complete the worksheet and at this point I don't have it.

[BHoffman]

I understand the worksheet and have had them provided by the person preparing the corporate tax return or have provided to them. I would still need the proper information to complete the worksheet and at this point I don't have it.

I agree with you that the distribution does indeed affect basis. I wonder if the distribution was in excess of it?

Thank you for understanding how hard it is to know how much the poster (that's you) is aware of regarding complicated things like shareholder basis worksheets. Glad you don't have to learn it and already know how it works. Agree that this client cannot really give you enough info. Good luck and welcome to the message board

[DONNA ASTON]

Thanks for the welcome. I have been on here one other time and it is a great message board. In order obviously for a loss on Sch D the cost basis would have to be more than the selling price and I don't see that given what little info I have. Also stock basis below zero creates a gain correct? Using the worksheet and including on the line item a decrease in stock basis the sch D would have a gain not a loss.

[DONNA ASTON]

sorry I meant a decrease in distribution. not stock

[Snaggletoof]

Sch D 1040

Donna, thanks for joining our forum, and hope you will return. There is a good worksheet in TTB for calculation of S corp Basis and Loan Basis. If someone has provided you with basis calculations from prior years, this assures that you have a chance at being able to successfully calculate the current basis. Without knowing the basis from previous year, it is virtually impossible.

I think too much emphasis (and possible confusion) has been placed on the Sch D, 1040. Actually, the Sch D is the very last link in the chain that is affected and has more to do with the 1040 preparation than anything else. The basis should be calculated long before Sch D is prepared.

[DONNA ASTON]

I agree and working on getting the 2007 adj basis. I have the worksheet out right now from TTB. The in house CPA gave me the K-1 to prepare the basis and this is where the problem started. Also she does not agree that the distribution in box 16D of the K-1 needs to be incorporated in the worksheet as a decrease. The client also received 1231 income and 1250 income does that not work into part of this calculation?

[DONNA ASTON]

is anyone able to comment on my last post? The CPA will not get off my back I have other returns to deal with tonight.

[BHoffman]

If the distribution was in excess of basis and taxed as a capital gain on the form 1040, then it would not decrease basis as that would already be zero.

If that is not the case, then I would just ask the inhouse CPA why this distribution does not decrease basis and wait for her answer. She might not know. Not all CPAs are good at taxes. Some specialize in financial statement work and never see a tax return.

I think if this client's inhouse is busting your chops at this late date, has alienated the prior preparer so you cannot get the basis worksheet, and is insisting on things that don't make sense....well, that's up to you.

Sometimes we have to do what we have to do. Sometimes there is a failure to communicate Hahahaha!

http://www.youtube.com/watch?v=SnO9Jyz82Ps&NR=1

[BOB W]

All allocated income and distributions effect basis. Are there any loans from officers on the books? How did the shareholder acquire his share? If stock was bought he may have outside basis not recorded on the books.

[JG EA]

And why on K-1 box 16 does the heading say:

Items affecting shareholder basis