S Corp shareholder basis - please help if you have the time - Spidell

S Corp shareholder basis – please help if you have the time

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Message Board S Corp shareholder basis – please help if you have the time

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    Anonymous

    Help! Have a client that was an S Corp for some 20 years, converted to a C Corp Jan 1 2006 and remained a C for about 10 years and then re-elected S Corp status Jan 1 2016. The corporation is in California and owned 50/50 by husband and wife, both residents of California. The husband passed away while it was a C Corp. So, what is the shareholder basis as of 12/31/2018 assuming the following hypothetical numbers:

    Shareholder basis on final day of S Corp, year 2005, stock basis $0, debt basis $50,000 for each.
    While C Corp in 2015 husband passes and corp is valued at 5 million and since California is a community property state wife’s outside basis is now 5 million but inside basis remains at 100,000, correct? No election to match the two since it is a corporation.

    The day the C corp reverts back to S corp status the debt is paid off so the inside basis for the wife is $0 and her outside basis is 5 million? Then, let’s say the next few years total income is 3,000,000, expenses are 2,500,000 and distributions are 500,000.

    so her outside basis and inside basis remaining the same, $0 inside and 5 million outside.

    Thank you to whomever has the time to help.