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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Hi, I just want to confirm the status of basis for our gifted

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Hi, I just want to confirm the status of basis for our gifted shares of S Corporation stock. The donor gifter at the time did not have basis as a result of using losses against the his initial investment as well as shareholder loans. Subsequently, he received distributions of the taxable profit. Although the company had a professional valuation at the time, I am now assuming they have no basis as the donor gifter's basis was zero. Is this assumption correct?

MyVirtualCPA : Thank you for your quesstion, and thanks for using
MyVirtualCPA : Yes, you are correct - the donors basis passes to the person they gave the gift to
MyVirtualCPA : therefore the basis is 0 for the gift
MyVirtualCPA : Whenever you give a gift your basis passes on to the person you gave the gift to
MyVirtualCPA : In this case, the basis is then 0.
MyVirtualCPA : Is there anything else I can assist you with? IF not, please rate my response as "excellent" so that I may receive credit for assisting you today
Customer: Therefore if the company is sold, the full sales price becomes taxable as there is no basis?
Customer: May I have your confirmation or other on above comment. Thanks
MyVirtualCPA : Yes, that is correct. If the company is sold, the entire amount is taxable with a basis of 0
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