I gained approval from the IRS to switch my LLC, previously filing as a sole proprietor, to FILING AS an S-Corp beginning in the 2024 fiscal year and I must now calculate a shareholder basis for use in tax filings.
However, the situation is a bit complicated. My books prior to 2024 were handled by a business associate who mistakenly had various personal accounts connected to Quickbooks, along with the business accounts. This meant that there was excessive comingling of personal expenses/funds into the books and many wildly inaccurate numbers, especially in the balance sheet. I started the books over at the beginning of 2024 and consider the old books as useless. I am confident that I have assembled an accurate balance sheet for the new books as it is based on beginning balances that accurately reflect the actual assets and liabilities present at the end of 2023.
I understand the basic math of shareholder basis calculation (initial investment + owner investments and net income minus owners draws for each year). However, much of what I have read about calculating shareholder basis advises going back to day one of the business to calculate shareholder basis for each year all the way up to the present. In my case, that would mean slogging through ten years of inaccurate books to come up with a number I could only assume would be way off.
My question is, how can I approach calculating my shareholder basis in this situation? Particularly, is there a shortcut for arriving at a shareholder basis that ignores all the useless pre-2024 data?
Many thanks for any assistance you can provide.
