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Erin has a $100,000 basis in the stock of an S corporation. Which of the following items, if any,...

Erin has a $100,000 basis in the stock of an S corporation. Which of the following items, if any, would not decrease her basis in the stock?

a. Distributions by the S corporation that are a return of capital.

b. Any expense of the S corporation that is not deductible in figuring its income and not properly chargeable to the capital account.

c. All loss and deduction items of the S corporation that are separately stated and passed through to the shareholder.

d. The amount of the deduction for depletion that is more than the basis of the property being depleted

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Answer #1

The answer is “A”.

This is because if the distribution is made by the S corporation then this will be done from the profits that they will earn during the year and not from the capital of the company.

So if the distribution is made in any year then this will not lead to any reduction in the basis of Erin.

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