REG S Corporation · Updated November 2026
AAA vs Stock Basis: Why Do You Need Both?
Stock basis belongs to the shareholder. AAA belongs to the S corporation.
Stock basis
Stock basis is shareholder-specific and affects loss deductions, distribution taxation, and gain or loss on disposition.
AAA
The Accumulated Adjustments Account is maintained at the S corporation level and tracks specified cumulative S corporation items for distribution-ordering purposes.
Different balances
AAA and shareholder basis can differ because contributions, purchases, and individual shareholder transactions do not affect both accounts identically.
Former C corporation
Accumulated earnings and profits from prior C corporation years can make distribution ordering more complicated.
The takeaway
Basis is shareholder-specific. AAA is a corporation-level tax account.
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FAQ
Does every shareholder have a separate AAA?
No.
Does each shareholder have separate stock basis?
Yes.
Are AAA and retained earnings the same?
No.