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Video instructions and help with filling out and completing Tax consequences of dissolving an s corporation
Instructions and Help about Tax consequences of dissolving an s corporation
Shareholder basis a shareholder basis we talked about earlier from an S corporation is originally calculated to be the same shareholder basis it would be for a C shareholder will add net income to that basis will add net separately stated items and subtract non-deductible expenses and distributions a shareholder share of liability what about the shares of liability partnerships get to add them to their bases S corporation shareholders do not they do not get to add them to their basis because they're not liable for them an exception exists if a shareholder actually puts money into the company in the form of a bonafide loan but the guarantee of a corporate loan in and of itself is not enough to add to shareholders basis until the shareholder actually has to pay the loan for shareholders stock basis can never be zero there are my people there 0000 cannot be lower than zero can a basis in a partnership fall below zero no partnership losses are deductible only to the extent of the partners outside basis if a partner receives a cash distribution in excess of outside basis that excess is taxed as a capital gain as a review of corporations can a basis in stock of a regular corporation fall below zero no corporate losses do not reduce basis only dividends do and if dividends come from capital because earnings are exhausted these are liquidating dividends we take them against basis bringing the capital down to but not below zero and any excess liquidating dividends beyond the basis being exhausted are taxed as capital gains so I EP can fall below zero and as an example where a EP was low was lower than zero to begin with and then we have an nol when that happens ordering rules are needed and we have ordering rules for regular corporations what are the ordering rules for an S corporation well the AAA account is distributed first AAA is distributed first which is good for you as a shareholder because that's tax-free distributions existing accumulated earnings and profits from years when the corporation was operated as a c-corporation go next and we bring the APA EP down to zero but it cannot go below zero because of the because of a distribution it can only go to with a distribution and below zero because of an nol when it was a c-corporation been any cash coming in goes against the shareholders basis and when the shareholders basis is exhausted any excess cash goes against capital gains what if we have both distributions and net losses what if we made a district the first of the year thinking we would be profitable forever and then we have a really bad year and nol distributions are taken before losses are applied so net losses may only be taken to the extent of stock then loan basis but may be carried forward and deducted by the same shareholder remember that.