Answer :
When adjusting a shareholder's adjusted basis in S corporation stock, the following should be taken into account in the right order:
- Contributions made to the S corporation
- Share of business income and separately stated items of income or gains
- Distributions to shareholders
- Share of non-deductible expenses
- Share of ordinary losses and separately stated items of loss/expense
What is Stock?
⇒ Stock, also referred to as capital stock, is the term used to describe all of the shares that make up a corporation's or company's ownership in the financial industry. Each share of stock represents a relatively tiny percentage of ownership in the company based on the total number of shares. After paying off all senior claims, such as secured and unsecured debt, the shareholder (stockholder) will then typically be entitled to that portion of the company's earnings, proceeds from the selling of a company's assets, or the distribution of voting rights, which are often distributed based on the amount of money invested by each stakeholder. Not all shares of stock are created equal; some classes may have been issued with enhanced voting rights, without voting rights, or with a particular priority to receive profits.Any other groups of shareholders are paid out either before or after the liquidation.
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