An S corporation shareholder calculates his initial basis upon formation of the corporation like C corporation shareholders.

Question

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An S corporation shareholder is treated as a C corporation shareholder for the purpose of calculating the shareholder's initial basis upon formation of the corporation. This means that the shareholder starts off with a basis equal to the amount of money and the fair market value of any property contributed to the corporation in exchange for stock.

An S Corporation Shareholder Calculates His Initial Basis Upon Formation