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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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If you pay back a sub s shareholder loan above basis and pay

Customer Question

if you pay back a sub s shareholder loan above basis and pay tax on the payment does this reinstate your basis?
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
You have two separate basis - stock basis and loan basis.If you bay back the loan - the stock basis is not affected, but the loan basis is adjusted by the amount paid off.
Customer: replied 6 months ago.

correct, previous losses have made the loan basis -0-, the sub s paid the loan and the shareholder put the payment on his schedule D, my question is, does this putting the income on schedule D reinstate his loan basis for future losses

Expert:  Lev replied 6 months ago.
To keep track of your basis - you would need to use worksheet from instructions.But what most important - you need to prepare the worksheet EVERY year.If you are using a tax preparation software - most likely - that worksheet should be prepared for you.
Expert:  Lev replied 6 months ago.
See page 3 - Worksheet for Figuring a Shareholder's Stock Basis basis is different - it is ONLY affected when principal is paid or deem as paid.Regarding income items - that are passed on K1 - they are reported as such.You may not choose to report income items on schedule D - only capital gains or losses are transferred to schedule D..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.