John Farrar

[S&D Associates]

Corporation was originally a C Corp. established in 1988. Corp. converted to a S Corp in 2011. The capital stock is $273,000. There are two equal shareholders. There has not been any additional contributions since inception. There is one asset a rental property. Would the basis be 1/2 of the $273,000 plus the asset and then the income and losses etc. from the K-1's since 2011?

[TAXNJ]

Reference

Corporation was originally a C Corp. established in 1988. Corp. converted to a S Corp in 2011. The capital stock is $273,000. There are two equal shareholders. There has not been any additional contributions since inception. There is one asset a rental property. Would the basis be 1/2 of the $273,000 plus the asset and then the income and losses etc. from the K-1's since 2011?

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Reference TTB SECTION 19 (THE TAXBOOK). This section provides great information and examples.
Basis of S Corporation Stock Upon Conversion From C Corporation
The basis of a C corporation shareholder’s stock becomes the beginning basis in stock when the corporation converts to S status. Earnings and profits (E&P) carried over from a C corporation do not add to basis. In some cases, it may be advantageous to distribute E&P before converting to S status. See Passive investment violation, page 19-5 .