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15 Tax On S Corp
15 Tax On S Corp
Taxation of S Corporations
D's tax basis as of the end of the year for D’s stock
held at end of the year:
§1012 cost basis (1/2 of 10x) $5,000
Plus: §1367(a)(1)(B) 20,000 income
Less: §1367(a)(2)(B) (10,000) loss
Equals: 15,000
(allocations to this ½ of stock based on 1/6
of total amounts)
Nancy's
basis: 1,000
plus: 2,000 (of 4,000) LTCG - 1367(a)(1)(A)
plus: 3,000 (of 6,000) income- 1367(a)(1)(B)
equals: 6,000 stock basis
less: 5,000 distribution - characterized as basis
recovery since not exceeding the AAA (which is
10,000). See §1368(c)(1). Nancy’s basis is reduced
to $1,000. AAA reduced by the 10,000 distribution.
4/25/2019 (c) William P. Streng 69
Problem 2(b) p.704
§1368(c) Distribution Rules
[to come]
[to come]
Issue is treatment of rents as passive income.