Carol is a 60% owner of a business entity and has an adjusted basis in such interest of $60,000.For the current tax year,the entity has profits of $50,000.If the entity is a C corporation,the corporate profits have no effect on Carol's basis in her stock.However,if the entity is an S corporation,Carol's basis increases to $90,000 [$60,000 + (60% * $50,000)].

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C corporation profits have no effect on a shareholder's stock basis.However,under the conduit concept,S corporation profits increase a shareholder's stock basis.

Carol Is a 60% Owner of a Business Entity and Has