Question

Which of the following reduces a shareholder's corporation stock basis?

a. depletion deductions in excess of the basis of property.
b. illegal kickbacks paid.
c. nontaxable income.
d. a 20% qbi deduction.

Answer 1

Depletion deductions in excess of the basis of the property reduce a shareholder's corporation stock basis. Illegal kickbacks do not affect stock basis; they could result in penalties. Nontaxable income usually increases the basis, and the 20% QBI deduction is taken on the individual's tax return, not against stock basis. Therefore correct option is A

Step-by-step explanation:

The element that reduces a shareholder's corporation stock basis is a. depletion deductions in excess of the basis of the property. A shareholder's basis in the stock is decreased by any return of capital distributions, nondeductible expenses that are not capitalizable, and certain deductions such as depletion deductions. Illegal kickbacks paid (b.) would not reduce the stock basis but could lead to legal issues and monetary penalties. Nontaxable income (c.) generally increases the basis. The 20% qualified business income (QBI) deduction (d.) does not reduce the basis of the shareholder's stock but rather is a deduction taken on the individual's income tax return.