[greeneyesCPA]

I’m working on Wiley MCQ for Regulation. In one question it states that a liability incurred to a third party ( a bank) by the S corp does not increase the shareholder’s basis. Although we are taught S corps are treated much like partnerships, in partnerships, a liability incurred by the partnership DOES increase the partner’s basis. This “point” is new to me as Becker did not emphasize this point in any of the MCQ’s.

Has anyone else realized this? Am I understanding this concept correctly?

FAR Passed
BEC Passed
AUD Passed
REG Passed

[littlenumberrobot]

I work in tax, and never have I added a third party liability to S Corp shareholder debt basis. I do not believe the treatment is similar to Partnerships. ONLY loans from the Shareholder are added to basis. I believe IRS rules state that they must be directly from shareholder too, not even loans guaranteed by shareholders count for basis(dont quote me on this but pretty sure).

CA CPA - All because of the journey listed below
-----------------------------------------------------------------------
FAR - 53('10), 8/25/12 79 PASSED!
REG - 66('11), 69('12), 12/06/12 77 PASSED!!
BEC - 58('10), 74('12), 01/05/13 77 PASSED!!!
AUD - 43('11), 66('12), 69('13), 74('13) 7/29/13 85 PASSED!!!!!

(Combinations of Roger, Yaeger, Wiley Book, Wiley TB, & NINJA Notes)

Ethics 90%

[greeneyesCPA]

@littlenumber…. I think you are correct. Thank you. 🙂

FAR Passed
BEC Passed
AUD Passed
REG Passed

[littlenumberrobot]

You're welcome. A good way to remember such difference is that with S corp shareholders are not liable for the company's loans as they are with a partnership.

CA CPA - All because of the journey listed below
-----------------------------------------------------------------------
FAR - 53('10), 8/25/12 79 PASSED!
REG - 66('11), 69('12), 12/06/12 77 PASSED!!
BEC - 58('10), 74('12), 01/05/13 77 PASSED!!!
AUD - 43('11), 66('12), 69('13), 74('13) 7/29/13 85 PASSED!!!!!

(Combinations of Roger, Yaeger, Wiley Book, Wiley TB, & NINJA Notes)

Ethics 90%

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