Tax treatment loss liquidating distributions
The consequences of distributions to the shareholders and the corporation are discussed further.
Shareholders in an S corporation must keep careful track of their tax basis.
As a result, the tax treatment of distributions will differ depending on the stock's basis (i.e., a distribution could generate a taxable gain for stock with a low basis, while at the same time be a tax-free retum of capital for stock with a high basis).
Distribution source and shareholders' basis for their corporate investment determine the tax consequences of distributions from S corporations.
The regulations being proposed under IRC Secs 13 provide the particulars of adjustments to stock basis and distributions to S corporation stockholders.
During 1992, she received salary payments from Giant of ,000 (including her portion of the health insurance premiums) and ,000 of cash distributions.
Results of operations for 1992 for tax purposes are presented in Table 1.
The shareholder's oil and gas depletion deduction; c. Non- separately computed losses that pass through; and e. Reducing stock basis for non-deductible items prevents a shareholder from converting a non-deductible expense at the corporate level into a deductible expense when stock is sold or a liquidating distribution is received.