The correct answer is option D: All loss and deduction items of the S corporation that are separately stated and passed through to the shareholder.
Option D: All loss and deduction items of the S corporation that are separately stated and passed through to the shareholder.
Items that decrease the basis in the stock of an S corporation include the amount of the deduction for depletion that is more than the basis of the depleted property, distributions by the S corporation that are a return of capital, and any expense of the S corporation that is not deductible in figuring its income and not properly chargeable to the capital account.
Loss and deduction items of the S corporation that are separately stated and passed through to the shareholder, on the other hand, do not decrease the basis in the stock. These items are passed through to the shareholder on Schedule K-1 and are used by the shareholder to determine their own tax liability.
Complete Question:
Mr. star has a $100,000 basis in the stock of an S corporation. Which of the following items will not decrease his basis in the stock?
A. The amount of the deduction for depletion that is more than the basis of the property being depleted
B. Distributions by the S corporation that are a return of capital
C. Any expense of the S corporation that is not deductible in figuring its income and not properly chargeable to the capital account.
D. All loss and deduction items of the S corporation that are separately stated and passed through to the shareholder.