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levr
levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 29558
Experience:  Working for a large tax preparation service
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When I formed a corporation (from a Sole Proprietorship) I

Customer Question

When I formed a corporation (from a Sole Proprietorship) I only paid a nominal amount for the stock. However, there were assets I provided (mostly intangible but with high value) that didn't get valued at the time. My accountants have not considered this
in past basis calculations and my distributions have exceeded net profits so far. So my basis will be zero or below zero now, unless we consider the value of the assets (website) I provided in business formation which is now worth several hundred thousand
dollars. So, Can I make retroactive adustments to the basis, taking into account assets provided when we formed? We recently posted a loss and I am afraid I won't have basis to use it on my personal taxes unless this is adjusted. Also, I don't think I have
ever had to report a basis calculation to the IRS. Where would that have gone if I had?
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  levr replied 1 year ago.

If you contributed assets - yes - these assets must be considered for the basis calculation.
However we should use your cost basis for these assets - if these are self-created intangibles - most likely your cost basis is not large and that will not make much difference.
But we may not use the fair market value of such assets - only your actual cost paid when you purchased or created these assets that was capitalized and NOT deducted.
Calculations for your basis is not reported to the IRS - but you will need to keep all supporting documents - if audited - you might be asked to provide.

Following article explains how stock basis is established and adjusted for S-corporations

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporation-Stock-and-Debt-Basis

Expert:  levr replied 1 year ago.

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