Schedule K-1 - Worksheet for Figuring a Shareholder’s Stock Basis

Page 2 of 14

Instructions for Schedule K-1 (Form 1120S)

13:56 - 30-OCT-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Other limitations may apply to
specific deductions (for example, the
section 179 expense deduction).
Generally, specific limitations apply
before the basis, at-risk, and passive
loss limitations.

Basis Rules
Generally, the deduction for your
share of aggregate losses and
deductions reported on Schedule K-1
is limited to the basis of your stock
(determined with regard to
distributions received during the tax
year) and loans from you to the
corporation. For details and
exceptions, see section 1366(d). The
basis of your stock is generally
figured at the end of the corporation’s
tax year. Any losses and deductions
not allowed this year because of the
basis limit can be carried forward
indefinitely and deducted in a later
year subject to the basis limit for that
year.
You are responsible for keeping
the information needed to figure the
basis of your stock in the corporation.
Schedule K-1 provides information to
help you figure your stock basis at the
end of each corporate tax year. The
basis of your stock (generally, its
cost) is adjusted as follows and,
except as noted, in the order listed. In
addition, basis may be adjusted
under other provisions of the Internal
Revenue Code. You can generally
use the Worksheet for Figuring a
Shareholder’s Stock Basis to figure
your aggregate stock basis.
1. Basis is increased by (a) all
income (including tax-exempt
income) reported on Schedule K-1
and (b) the excess of the deduction
for depletion (other than oil and gas
depletion) over the basis of the
property subject to depletion.
You must report the taxable
income on your return (if you
are required to file one) for it
to increase your basis.

!

CAUTION

Basis is not increased by
income from discharge of your
CAUTION indebtedness in the S
corporation (nor by any amount
included in income with respect to
clean renewable energy, Gulf tax
credit, Midwestern tax credit, or (for
bonds issued before October 4, 2008)
qualified zone academy bonds).
2. Basis is decreased by (a)
property distributions (including cash)
made by the corporation reported on
Schedule K-1, box 16, code D, minus
(b) the amount of such distributions in
excess of the basis in your stock.

!

3. Basis is decreased by (a)
nondeductible expenses and (b) the
depletion deduction for any oil and
gas property held by the corporation,
but only to the extent your share of
the property’s adjusted basis exceeds
that deduction.
4. Basis is decreased by all
deductible losses and deductions
reported on Schedule K-1 adjusted, if
the corporation made a charitable
contribution of property, by
subtracting the property’s fair market
value and adding the property’s
adjusted basis.
You may elect to decrease your
basis under (4) prior to decreasing

Worksheet for Figuring a Shareholder’s
Stock Basis

your basis under (3). If you make this
election, any amount described under
(3) that exceeds the basis of your
stock and debt owed to you by the
corporation is treated as an amount
described under (3) for the following
tax year.
To make the election, attach a
statement to your timely filed original
or amended return that states you
agree to the carryover rule of
Regulations section 1.1367-1(g) and
the name of the S corporation to
which the rule applies. Once made,
the election applies to the year for
which it is made and all future tax
years for that S corporation, unless

Keep for Your Records

1. Your stock basis at the beginning of the year . . . . . . . . . . .

1.

Increases:
2. Money and your adjusted basis in property contributed to
the corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Your share of the corporation’s income (including
tax-exempt income) reduced by any amount included in
income with respect to clean renewable energy, Gulf tax
credit, Midwestern tax credit, or (for bonds issued before
October 4, 2008) qualified zone academy bonds . . . . . . . .

3.

4. Other increases to basis, including your share of the excess
of the deductions for depletion (other than oil and gas
depletion) over the basis of the property subject to depletion

4.

Decreases:
5. Distributions of money and the fair market value of property
(excluding dividend distributions reportable on Form
1099-DIV and distributions in excess of basis (the sum of
lines 1 through 4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. (

)

6. Enter: (a) your share of the corporation’s nondeductible
expenses and the depletion deduction for any oil and gas
property held by the corporation (but only to the extent your
share of the property’s adjusted basis exceeds the
depletion deduction) or (b) if the election under Regulations
section 1.1367-1(g) applies, your share of the corporation’s
deductions and losses (include your entire share of the
section 179 expense deduction even if your allowable
section 179 expense deduction is smaller) adjusted, if the
corporation made a charitable contribution of property, by
subtracting your share of the fair market value of the
contributed property and adding your share of the
property’s adjusted basis . . . . . . . . . . . . . . . . . . . . . . . . .

6. (

)

7. If the election under Regulations section 1.1367-1(g)
applies, enter the amount from 6(a) above. Otherwise enter
the amount from 6(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. (

)

8. Enter the smaller of (a) the excess, as of the beginning of
the tax year, of the amount you are owed for loans you
made to the corporation over your basis in those loans or
(b) the sum of lines 1 through 7. This amount increases
your loan basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. (

)

9. Your stock basis in the corporation at the end of the year.
Combine lines 1 through 8 . . . . . . . . . . . . . . . . . . . . . . . .

9.

-2-

Instructions for Schedule K-1 (Form 1120S)