Repayment of Loans from Shareholders showing as income in 1040

[Babak]

My client received a Schedule 1120S K-1 with an amount in box 16 E. That reflects the amount business paid him back for the loan he made to the business during the year. When I entered that, it was added to his income while it was a loan payback. How can I fix that?

[PhoebeRoberts]

Make sure your Form 7203 is prepared correctly. It's not unusual to have gain on a loan repayment in an S-corp, because you can take losses against debt basis.

[Babak]

But the whole loan is shown as income not a portion of it.

[PhoebeRoberts]

So when you work through the Form 7203, how much basis does your guy have in the loan?

[Babak]

e whole remaining loan balance is in his basis.