Form 7203 Not correct

[TaxGirl11]

I noticed that Form 7203 from the S corp module is not matching the 1040 Form 7203 for the same taxpayer.  The company is NOT a passive activity so the basis should match.  I noticed that ND are not transferring to the individual 7203 form.  Why doesn't the system transfer the ND during the K-1 export.  

[Strongsilence-CPA]

nondeductible expenses?  NDE is the typical acronym.

[Strongsilence-CPA]

1. Nondeductible Expenses and Basis Calculation:

   • S Corporation Level: On the S Corporation's 7203 form, nondeductible expenses are used to adjust the shareholder's basis in the corporation. Nondeductible expenses decrease the basis, and tax-exempt income increases it. These adjustments ensure that the basis reflects the shareholder's economic interest in the S corporation.
   • Individual Level (Form 1040): When it comes to the individual's 1040 tax return, the nondeductible expenses themselves do not flow through since they are not deductible. However, the adjusted basis (which is affected by nondeductible expenses at the corporate level) is crucial for determining the amount of loss or deduction a shareholder can claim against other income on their individual tax return.

[TaxGirl11]

Thank you for responding.  It is super concerning to me that I did not know this.  Which basis do I use to determine if the shareholder can deduct a loss or if the distribution is subject to capital gains tax.  I guess I dont understand what the purpose of two different basis for an S Corp.

[Strongsilence-CPA]

"two different basis...."  States have different laws from Federal. So different tax basis schedules are needed.

Form 7203 is the perfect place to learn about tax basis.

Is your beginning basis correct?

Enter cash distributions made from the Corp.

Enter property contributions made to the Corp.

Enter cash contributions made to the Corp