Determining basis is importance for a multitude of reasons beyond the IRS investigations. The three most important reasons are:
- it limits the amount of corporate loss that can be deducted
- it’s key to determining a gain or loss when stock is disposed of
- it sets the upper limit of tax free distributions that can be received
Know your basis, understand how it is calculated, ask questions of those whom you have entrusted your records to. Make sure they are looking out for your interests and not just going through the motions. You will pay the price if they do not.