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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4154
Experience:  35 years tax experience, including four years at a Big 4 firm.
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If a c-corp converts to an s-corp, is the basis of the

Customer Question

If a c-corp converts to an s-corp, is the basis of the s-corp stock at the time of conversion equal to the net equity of the c-corp?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax. I can assist.

Expert:  PDtax replied 1 year ago.

The answer to the s corp basis is that the shareholder retains their original basis in the shares. Subsequent C corp profits, retained earnings, C corp. dividends have no impact on the basis.

To have any other treatment would allow for a circumvention of the C corp tax rules, for a tax at the corporate level and a tax when income is distributed to the shareholder.

So, your basis in the C shares will be the basis in the shares once converted to s.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.