Basis of shareholder

[oceanlovin'ea]

I just want to confirm the process to come up to the basis of a shareholder in an S corporation. It is their investment in business or paid in capital plus profit or minius loss of corporation for the year plus their loan to the corporation.

Is that correct that the loan they make to the corporation increases their basis in the business and thus the amount of loss they are allowed to deduct?

Linda F

[dsi]

Linda, loans from the SH to the Corp don't increase stock basis, rather debt basis/at risk basis. As the loans are repaid, the client will have to recapture as income the amount of loss that was passed thru to the SH to be written off on his individual tax return.

[Greenbriar]

How to report recapture

David,
I understand the recapture but where and how is it reported? I assume the K1 from the S corp. Seems to me everything eminates from the S corp K1. Thanks.

[Bees Knees]

IRS Pub 925 page 23 says you add the recaptured amount to your income from that activity for the year of recapture. I would do this on a separate line. For example, if the activity is a K-1 from an S corporation, I would report the line 1 K-1 amount on Schedule E, page 2, line 28a, and then the recaptured amount as income on Schedule E, page 2, line 28b and identify the activity as the same one reported on line 28a, with the words "at-risk recapture" after the name of the activity.