Income Tax

S corp. basis and why it’s important

Scorporations are considered passthrough entities that pass the income and losses earned from the business to the shareholders, who are taxed on the business’s income and losses on their individual income tax returns. However, an S corporation shareholder cannot automatically assume that a loss passed through from the company is deductible on his or her individual income tax return. The first step is to determine whether the shareholder has sufficient basis in the entity to deduct the loss.

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