Question

Which of the following are decreases to a shareholder's basis in an S corporation?

1) Distributions
2) Losses
3) Contributions
4) Income

Answer 1

Decreases to a shareholder's basis in an S corporation include Distributions and Losses, while Contributions and Income increase the basis.

Step-by-step explanation:

The question pertains to changes in a shareholder's basis in an S corporation. Specifically, the decreases to a shareholder's basis. Among the options given:

• Distributions are indeed a decrease to the basis if they exceed the shareholder's basis in the stock.
• Losses allocated to shareholders also decrease the basis because they represent the shareholder's share of the corporation's losses.
• Contributions increase a shareholder's basis as they represent additional investment into the company by the shareholder.
• Income allocated to shareholders increases the basis as it represents the shareholder's share of the corporation's income.

Therefore, the correct answers that decrease a shareholder's basis in an S corporation are Distributions and Losses.