1. What Is Stock Basis From K-1?

Stock basis represents your investment in a partnership or S corporation for tax purposes. It's calculated using information from Schedule K-1 and determines the tax consequences of distributions and sales.

2. How Does The Calculator Work?

The calculator uses the stock basis formula:

Where:

• \( Prior\ Basis \) — Your basis at the beginning of the tax year
• \( K-1\ Income \) — Your share of income/loss from Schedule K-1
• \( Distributions \) — Cash or property distributions received

Explanation: This calculation tracks your economic investment in the entity, which affects taxable gains/losses when you sell your interest or receive distributions.

3. Importance Of Stock Basis Calculation

Details: Accurate basis calculation is crucial for determining taxable distributions, calculating gain/loss on disposition, and ensuring proper tax reporting. Basis limitations also affect loss deductions.

4. Using The Calculator

Tips: Enter prior year basis from your records, K-1 income from line 1 of Schedule K-1, and distributions from line 19. All values should be in dollars.

5. Frequently Asked Questions (FAQ)

Q1: What happens if distributions exceed basis?
A: Distributions in excess of basis are generally taxable as capital gains, creating a taxable event even without selling the interest.

Q2: How does debt affect stock basis?
A: For partnerships, your share of entity debt may increase your basis. S corporation shareholders generally cannot include debt in basis.

Q3: What other items affect basis?
A: Basis is also increased by additional contributions and decreased by losses, nondeductible expenses, and depletion.

Q4: Can basis be negative?
A: No, stock basis cannot go below zero. Losses in excess of basis are suspended and carried forward to future years.

Q5: How often should I calculate my basis?
A: Basis should be calculated annually when you receive your Schedule K-1 to ensure accurate tax reporting and planning.