REG Section

REG S-Corp Stock Basis Practice

Master S corporation basis rules with targeted practice on stock basis, debt basis, loss limitations, and distribution taxation.

What You'll Practice

Our questions are aligned with the AICPA CPA Exam Blueprints, the authoritative guide for what's testable.

Stock basis calculation and ordering
Debt basis creation and restoration
Loss deduction limitation rules
AAA tracking and distributions
Distributions with accumulated E&P
Suspended loss carryforward rules

Common Traps to Avoid

These are the patterns that trip up candidates. Our questions specifically target these areas so you won't fall for them on exam day.

1.Confusing stock basis ordering with debt basis ordering
2.Thinking loan guarantees create debt basis (they don't)
3.Missing the AAA distribution ordering rules
4.Forgetting suspended losses carry forward indefinitely
5.Not distinguishing at-risk from basis limitations

7-Day S-Corp Basis Mastery Plan

Day 1
Review stock basis fundamentals
Day 2
Practice stock basis ordering rules
Day 3
Drill debt basis creation scenarios
Day 4
Practice loss limitation calculations
Day 5
Review AAA and distribution rules
Day 6
Practice accumulated E&P scenarios
Day 7
Comprehensive S-corp quiz + review

Try 10 Free Practice Questions

See how our question bank targets exactly what you need to pass. No credit card required.

Why Our Question Bank

Clear basis ordering explanations
Loss limitation calculation drills
AAA tracking practice
Distribution tax scenarios
Track progress by S-corp topic

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Frequently Asked Questions

When and how is debt basis created in an S corporation?

Debt basis is created when a shareholder makes actual loans to the S corporation—not guarantees of third-party debt. The shareholder must have a direct economic outlay. Debt basis is separate from stock basis and follows different rules for restoration and ordering.

What is AAA and why does it matter?

Accumulated Adjustments Account (AAA) tracks S corporation earnings that have been taxed but not distributed. Distributions come from AAA first (tax-free return of previously-taxed income), then from Accumulated E&P (if any, taxable as dividends), then from remaining stock basis.

When are S corporation distributions taxable?

Distributions are taxable when they exceed AAA (if there's accumulated E&P, that portion is a dividend) or when they exceed stock basis (capital gain). Most S corps without C corp history can distribute AAA tax-free until it exceeds shareholder basis, then it's capital gain.

How do loss carryforwards work when basis is insufficient?

Losses exceeding basis are suspended and carried forward indefinitely until the shareholder gets more basis (through income allocation or additional investment). The at-risk and passive activity rules may impose additional limitations even if basis exists.

Related Practice Areas

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