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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12481
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I need to find out my basis in the shares/stocks I own in in

Customer Question

I need to find out my basis in the shares/stocks I own in in a small business, I own 1/3 of the shares. Here is the equity section:
Stockholders' Equity:
COMMON STOCK 1000 SH ISSUD&O/S $1,000.00
Submitted: 1 year ago.
Category: Tax
Expert:  BK-CPA replied 1 year ago.
Hello and thank you for your question. The equity section of a balance sheet is not relevant to your question. Your basis in the shares is generally what you paid to acquire them. I'm going to opt out for now, but if anyone is going to be able to help you, you'll have to provide the following info to start: 1) How did you acquire the shares (by purchase, inheritance, as a gift, etc.)?2) How is the business taxed (c-corp, s-corp)?
Expert:  Lane replied 1 year ago.
Hi, Different expert here. Yes - basis must be tracked from the first day ... looking at any one year's financials is only one year's worth of the picture....You are using common stock - a term only really correctly used with a C-Corporation. (... can be applied to an S-Corp, but it's a rather contrived term. An S-Corp is just an election for an LLC or a corporation to be taxed in a fashion very similar to a partnership)....For a C-Corp determining basis is typically easier, because it's a separately taxed entity that pays taxes at corporate rates on it's profits. You're basis in the C-Corp is (this is a bit simplified but) the amount you've paid for your stock IN the C-Corp....For an S-Corp (a pass-through entity that doesn't pay it's own taxes) ... again, an oversimplification, but basis is increased by contributions, decreased by distributions, increased by profits and decreased by losses (because, again, these all flow through to the shareholder/employee at the personal return level)...Here's an excellent article on how S-Corp basis should be tracked, every single year:
Expert:  Lane replied 1 year ago.
I hope this has helped, at least, to point you in the right direction...If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit That’s the only way JustAnswer will credit us for the work here....Thank you!Lane……I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate & tax advice since 1986.