Level 2

Question

DISTRIBUTIONS OVER BASIS

Forum|Forum|4 years ago
May 19, 2022
3 replies
24 views

Hi:

I have a Sub S Client with distributions in excess of Stock basis mainly due to taking Bonus depreciation on several financed Equipment. . I understand that this has to be reported as LT Capital gain right?

If so how would I enter that on from 1120-S

ANOTHER OPTION?

It is possible that this would be offset by income in 2022 so is it advisable to enter it as a Loan to Shareholders for the time being or an entry on Line 25 Schedule L adj. to Shareholder equity

Any guidance will be immensely appreciated

Thanks

MP

ProSeries Professional

This topic has been closed for replies.

sjrcpa

Level 15

Distributions in excess of basis are reported as a capital gain on the shareholders' returns, not on the 1120S.

The more I know the more I don’t know.

M

M PENSKEAuthor

Level 2

Thanks for the response.

I know but I do not prepare the personal returns for the share holders in question

So where on K-1 do I report the amount

MP

abctax55

Level 15

@M PENSKE

You report the distributions. They show up on line 16D of the K-1, as well as on the new F 7203

The shareholder is responsible for determining, and reporting, the gain.

HumanKind... Be Both

JRC

Level 7

On 1120S you report as a distribution as ABCtax55 said.

You can (Should) include the ShareHolder Stock an Debt Basis Limitation Worksheet with the K-1's to aid the taxpayer in preparing their Individual 1040's.

Form 7203 (NEW for 2021 Individual 1040) is included on the Shareholder Level to file with their returns. This is not attached to the 1120S or part of the Corporate Return.

abctax55

Level 15

Thanks @JRC for clarifying that the F 7203 will be prepared by the individual.

HumanKind... Be Both

JRC

Level 7

If you do a Note Receivable instead. Create a formal written Note with interest and have the SH pay it back with their own Moneys within a short period of Time.

Just my Opinion and you didn't hear it from me.

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