When a “sub-chapter S” election is made, a corporation is treated taxwise as an individual. That means all of the corporate income, loss, deduction and other tax items flow through the corporation to the individual shareholder’s tax return. So, for example, if the corporation has a loss, that loss is deductible by the shareholders on their personal tax returns. But, the loss is limited by the shareholders’ tax basis in their stock. Stock basis is determined by the shareholder’s original investment in the corporation’s stock plus certain debt basis. Also, the manner in which the shareholder acquires the stock influences basis (e.g., whether it was received as a gift, a purchase, as compensation or through an estate).