S corp stock / debt basis & AAA

What this does

How to read it Visual: dual path chart for stock vs debt basis across steps.

Track stock basis, debt basis (direct loans only), and AAA through the year. Order matters — and guarantees create no debt basis.

Visual: dual path chart for stock vs debt basis across steps.

Shareholder basis (Form 7203 mindset)

Beginning stock basis Income items (incl. tax-exempt) Non-dividend distributions Nondeductible expenses Loss & deduction items Beginning debt basis (direct loans only) Beginning AAA (corporate) Guarantee of bank loan (not a loan)

Stock basis vs debt basis path

Ending stock basis

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Distribution gain

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Ending debt basis

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Allowed loss / suspended

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AAA after items (sketch)

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Debt basis from guarantee

Exam trap: Order = income → distributions → nondeductibles → losses. Debt basis does not shelter distributions. Guarantees create no debt basis. AAA ≠ shareholder stock basis.

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Study tool only — not official IRS software. Figures labeled 2025 track law/forms through Dec 31, 2025. Confirm against current IRS pubs before the exam.