[Anonymous]

There’s the same question done in both Wiley and becker for s corp distributions but both give a different answer

Baker, an individual, owned 100% of Alpha, an S corporation. At the beginning of the year, Baker’s basis in Alpha Corp. was $25,000. Alpha realized ordinary income during the year in the amount of $1,000 and a long- term capital loss in the amount of $3,000 for this year. Alpha distributed $30,000 in cash to Baker during the year. What amount of the $30,000 cash distribution is taxable to Baker?

Becker’s answer: 30,000-23,000= 7,000

Wiley’s answer: 30,000-26,000= 4,000 Here is wiley’s explaination: Baker will not be able to deduct the long term capital loss of 3000 this year because the cash distribution reduced his stock basis to zero. Instead the 3,000 loss will be carried forward and will be available as deduction when he has sufficient basis to absorb the loss

which one should I rely on?

[liuyinuo88]

I think Becker's anwer is right. Sareholder's basis in S corp will be increased/decreased by separately stated items, such as capital gains/losses and nontaxable interest, etc. Therefore, the capital loss should be accounted for when calculating Baker's basis in the S Corp. That is the only difference between the two answer. That is what I thought.

[Anonymous]

Becker answer should be correct. If you received cash distribution in excess of your basis, that excess is taxable.

[Author]

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