Frequently Asked Questions
What are the two basic types of records that officials designate for a shareholder to keep?
In the realm of stock basis, officials designate two basic types of records that a shareholder must maintain. These are the basis in the stock of an S corporation (S corp) and the debt that an S corp owes to its shareholders.
The first type, the basis in the stock of an S corp, is crucial for determining losses and gains on the selling of the stock, as per Section 1001. It also helps in assessing the loss amount a shareholder may use, including how much should be carried forward and suspended.
Furthermore, it aids in determining a distribution’s taxability received from the business to the shareholder.
The second type, the debt that an S corp owes to shareholders, primarily pertains to assessing the loss amount that a shareholder can utilize. It's important to note that the debt basis does not pertain to determining loss or gain on the selling of the stock, and it does not affect the distribution taxation of an S corp.
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