S Corp Basis Explanation | Distributions in EXCESS of Basis

I have to take a personal loan for my business since I couldn’t take out a business loan. Should I file as shareholders loan to business?

Hello Navi, can you recommend a tax planning software for an a CPA. I have a small firm and I would like to offer tax planning services to my clients. The budget is limited so I would appreciate your suggestion

Nice content! How should the impact of home office depreciation on S corp basis be recorded? How should a mortgaged business vehicle be recorded?

Thank you!

This doesn't make any senese. Why would the bank only have $1k? Wouldn't this example imply that there is some sort of loan that is also a balance sheet liability. Otherwise, how is the owner able to take a distribution in excess of his basis after taking the $41,000. What am I missing exactly? Is this example assuming that we had $35k in the bank, took that $35k with the $40k of profits to make $75k. Since $41k of it ($1k In Basis + $40k profit) was part of his basis, the remaining $34k is excess distribution?

Hi Navi. Great content and simple math for explanation and walk-through. Is 'Distribution' the same as the Owner's Draw (the money you take out of the business account to your personal account)? And is 'Basis' the same terminology for the Accumulated Adjusted Account (AAA)? My CPA tells me to watch out for how much I take out (Owner's Draw) or I will have to pay the Capital Gain taxes on my AAA. Your video seems to nail my question and how to calculate the AAA. Thank you!!

Your videos are perfect for new-to-the-game small business owners. Understandable, step-by-step, practical. Thank you.

This video was great Navi. The step by steps are clear as a bell. Thanks

Seems like you might be conflating accrual and cash accounting regarding credit cards. If you assume a cash basis of accounting, the expense would be incurred when paid and it would decrease your basis. Your comment about paying off your CC to avoid taxes makes no sense to me. Am I missing something?

Love it you ROCK🤲🏾

Great way to lay things out bare in Excel and explain it. Fantastic

This is a fantastic video. It's clear and easy to understand your explanations. Thank you for providing this information.

What is the proper amount of interest to charge the shareholder for taking out a loan from the S Corp?

Thank you for a detailed explanation.

Once a Capital gain is recognize. Do we need to adjust the AAA acccount to bring it back to Cero? or does it stay negative?

how does the irs know what your distributions are? if you're only taxed on net profits and distributions dont get taxed, how do they track this? (i'm thinking of distributions as any zelle payment or check that is over and above the payroll wages you process for yourself as a s corp owner on w2. is that what you're referring to or is distributions referring to something more detailed? thanks

I am working with a business (gym) that has been a profitable single member llc in 2021 thru 2023. They are converting to scorp in 2024. Can income from those years be used to calculate the starting basis? or basically do they add up totals in bank accounts and value of current assets (gym equipment) to determine starting basis? thanks

Dumb... 14 minutes to poorly "explain" nothing

Do the distributions get taxed on the personal level?

To put this in context of my industry, trucking. If I have a loan on a truck and let’s say I still owe $150k and my company nets $120k does that mean I can’t take a distribution at all?

Thank you. This was a good way to simply explain how an owner takes out more than their basis. The only thing missing would be an explanation of how to change the excess distributions to be a loan to shareholder to avoid paying cap gains on it.

Thank you for your video. It was exceptionally helpful in explaining some things I had been wondering for a while.

Hi Navi, what if the business loans are 3rd party loans i receive the cash and distributed the cash to myself. Is this all excess distribution that will be charged capital gains

Also what if I took out excess distribution due to the 3rd party loans made to the business in which i am the owner and 100 % shareholder

Amazing thanks for sharing

Can your yearly distributions be higher than your salary? Hypothetical- Reasonable compensation w/ Salary of 100k, but if it is a good year and the overall net income exceeded 230k. can the distributions be over a matching 100k? (Also implying that the distributions will not exceed the basis).

Great video thank you!

Thank you for the video! Much appreciated

thanks a lot for your video

And yet you still haven't explained exactly what a 'basis' is, nor how to calculate it.

Hi Navi, thanks for the video. It is very helpful.
Do you have a plan to do a debt basis video?

Isn’t it a great idea to invest more capital from the beginning and not use credit cards? Liabilities are the main issue I assume? And over/under payments.

A million thank yous. You were able to make this capital gains make sense in 15 minutes that multiple conversations with my accountant could not achieve. I changed my business structure from sole proprietor to S Corp January 2020 and just as you said took an EIDL loan without the understanding of the impact it would have on my taxes. Now, three years later I am understanding how to get out of the capital gains hole. Again, thank you so much.

Thank you for this video! I'm learning S Corps for a few clients. Your excel format streamlined and easily understood.

I enjoyed this video. One thing I would love to see that would help long time business owners is how to re-create basis from their history of K-1s. Especially for things like box 16 code C non-deductible items and such. Maybe a tutorial showing exactly which boxes on K-1 are additions to that original capital contribution and which boxes are subtractions so that one could re-create an correct history of basis given that the IRS is now asking that it be tracked correctly.

Thank you very much for going through the details! :)

This was great. If a shareholder who took out a distribution that was more than their basis, can they book that draw as a 'loan' to the company and pay it back the next year or later?

Thanks for the video. I don't see how a loan would help resolve the issue as it will be recorded as a liability and not increase basis.

Finally, someone does explain the distribution in a very concise manner. Thank you for that

Finally, I get it. 😊 You explained this so well!!! 🎉Thank you and I’ll check out your courses you have. 👍🏼

Thank you so much for such a great video

Very helpful. Thank you for making this video.

Very helpful. Thank you! How do you add a new shareholder to your existing S-Corp?

Finally a thorough explanation with examples and numbers. Thank you so much! You untied a massive knot in my head and allowed me to understand how to do the taxes. I've watched a ton of other videos and was even more confused than before watching them. Felt really overwhelmed and anxious until I found yours. THANK YOU

Good stuff, learned some things I didn't know.

Hi Navi is this spreadsheet available for download or purchased. Im a new business owner and im si thankful for this video

Good stuff! Thank you Navi!!

Phenomenal!

This was super helpful! Thank you.

Great information and learning, you mentioned that taking Shareholder Loans to Business can help, how would you include that in the example