Which of the following does NOT increase an S corp shareholder's stock basis?

When determining an S corporation shareholder's stock basis, it's important to understand how various transactions impact that basis. A shareholder's stock basis represents their investment in the S corporation and can be adjusted over time based on different activities.

In the scenario described, distributions made to the shareholder do not lead to an increase in stock basis. In fact, distributions typically result in a decrease in the shareholder's stock basis. This is because distributions represent a return of capital to the shareholder, effectively reducing their investment in the S corporation.

On the other hand, factors that do increase stock basis include money contributed to the corporation by the shareholder, the adjusted basis in property that the shareholder contributes to the corporation, and the shareholder's share of the corporation's annual income. Each of these components reflects an increase in the shareholder's investment or their share of the corporation's profitability, leading to an increase in stock basis.

Understanding these adjustments is crucial for determining how a shareholder's financial interest in the S corporation changes over time, particularly for calculating gains or losses upon the sale of the stock or when taking distributions.