Explain why the basis of S corporation stock is increased by the stockholders share of ordinary income

Question:

Explain why the basis of S corporation stock is increased by the stockholder’s share of ordinary income and separately stated gain and income items and reduced by the stockholder’s share of an ordinary loss and separately stated loss and deduction items.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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