Co-borrowing Doesn’t Create Shareholder Basis

S corporation shareholders can deduct losses passed through to them only to the extent of their basis in stock and debt. The Tax Court said that co-borrowing doesn’t create basis until the shareholder is called upon to pay the loan. This is the same rule that applies when shareholders guarantee loans made to their S corporation by third parties.

Open
Close

Big Ideas for Small Business®
Find it for free on the App Store.
Get