1120S Basis Limitation

[Harvest]

So I have an S Corp client with three owners. I calculated basis for each shareholder in the 1120S return. I have asked and been told before in the forums that there is no basis calculation form in 1040. So do I just export a PDF copy of the basis calculation from the 1120S then attach it to the 1040 as an other attachment in the EF screen? What do you do?

[TaxGuyBill · Accepted solution]

Technically, the corporation does not need to keep track of the Basis of the shareholders.  That is the job of the shareholders.

Assuming you want to do the shareholders a service, sure.  Any way you want to show how the Basis is calculated.  Using the worksheet in the corporate program works fine.

If I remember correctly, Basis statements only need to be filed with the 1040 if they are claiming a loss.  If there is a loss, yes, I would attach it by PDF.

[Terry53029]

Not sure if it is correct, but on the 1040 K1, I fill out the supporting statement (click on the page icon to right of line). Then I put the amount reported, and then the basis limit which is subtracted from amount reported. Have been doing this for a number of years without problem.

[Harvest]

Yes, you are correct about the S Corp not needing to keep track of the basis for the shareholders, but in this case since I am filing returns for all shareholders it is easiest solution. I hope Proseries adds a basis computation worksheet for 1040's sometime soon, because if I get a 1040 that I do not file the 1120S I will have to manually draft up a basis statement to attach. Bill, have you ever run into this issue before?

Also, I just discovered that at in February 2019 the IRS posted a clarification that basis statements are required if an S Corp shareholder reports a loss, receives a distribution, disposes of stock, or receives a loan repayment. Since most all shareholders receive distributions, this means a basis statement is almost always required.

[Harvest]

Are you saying you figure the basis limitation by using the K-1 Part III Line 1 Supporting statement?

I could see how that could give you the correct computation results, but wouldn't it look odd since the K-1 you are putting in the return wouldn't match the original submitted with the 1120S?

Also where do you attach your basis statement that supports the limitation you placed into the K-1 line 1?

Do you just attach it as an "other" attachment to the return in the Efiling center and make a memo that its for Schedule E Line 28(e)? And do you use a spreadsheet to compute the basis if you did not receive a basis computation with the K-1 from whoever filed the 1120S?

[Terry53029]

If you look at most lines requiring a number, to the right is an icon of a page. when you click the icon a box will popup with several numbered lines, this is a supporting statement. You don't figure the basis here, you put the basis here, so amount reported as a loss will be adjusted to limit the loss to basis.

[Terry53029]

Maybe @Just Lisa Now  will show us one of her screen shots to further explain it 

[TaxGuyBill]

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@Harvest wrote:

Also, I just discovered that at in February 2019 the IRS posted a clarification that basis statements are required if an S Corp shareholder reports a loss, receives a distribution, disposes of stock, or receives a loan repayment. Since most all shareholders receive distributions, this means a basis statement is almost always required.

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Oops, I missed that one.  Thankfully, I only have one client affected, and he still hasn't given me information for 2019 yet.  Sigh.  Thank you.

Yeah, Intuit is severely negligent in this regards.  

The worksheet in the corporate ProSeries is probably fine, but you may consider just manually using the worksheet in the Instructions.

https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf#page=4