Level 2

 A new client:  S-Corp solo shareholder has a beginning negative shareholder's equity basis of ($60K) and a loan balance of $140K.   Can I transfer the negative basis balance to the loan?  (In prior years, the business losses & distributions were taken to the 1040 even though there was a negative equity balance. )

This year,  there is an ordinary gain of $10K but a potential 179 deduction of $25K.  Can I transfer $75K from the equity balance to the loan balance, so the SH can take the 179?

There was also a $30K distribution but I'm taking that as a shareholder principal payment.  So after all this, the ending equity basis would be $0 and the loan balance would be $35K  ($140K- $75 transfer -$30K principal payment).  

Am I doing this correctly?  

Thank you for your assistance!

P.S.   There is no basis calculation sheet attached to the prior year 1040 schedule E, so I'm assuming the basis on the K-1 is correct since it's one person and no transfers in the past.

 

 

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