Basis Limitation

[Harvest]

How should I be entering/documenting basis limitation on individual return for S-corp K-1. Client basis went negative this year, but I only see worksheets for passive activity and at risk loss limitation and no basis computation worksheet. Is there a basis computation worksheet (with calculated limitations)? If not what is everyone doing to work around this?

[Accountant-Man · Accepted solution]

PS does not have a basis limitation worksheet.

I use the 6198, at risk.

[Harvest]

I wish they would add a separate sheet for that calculation it would be more appropriate, but at risk worksheet will work. I wonder if Lacerte has that worksheet, but obviously this is not the place to ask that question.

[sheri414]

How are you making Form 6198 work?  I have the info filled in and in Part IV of 6198, ,it shows $-27,442 as deductible loss and $16,401 as amount at-risk at end of year.  Yet the full loss of $39,944 is flowing to schedule 1.  I cannot figure out how to make it only allow the loss up to their basis.  What am I doing wrong?

[sjrcpa]

FYI. Lacerte does have basis computation worksheets; will limit the allowed loss to basis; and will carry over the losses in excess of basis.

[TaxGuyBill]

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@sheri414 wrote:

 What am I doing wrong?

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Well, the first thing you are doing wrong is using Form 6198 (for "At-Risk" limitations) to limit Basis.  😁

[sheri414]

Do you have a better method?  I've researched this and from what I've found, ProSeries doesn't have a basis limitation worksheet and other users are using 6198 to calculate.  How do you handle losses in excess of basis?

[sheri414]

I'm a 20 year ProSeries user so not wanting to switch software this far in.  But thanks for the suggestion.

[TaxGuyBill]

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@sheri414 wrote:

Do you have a better method?  I've researched this and from what I've found, ProSeries doesn't have a basis limitation worksheet and other users are using 6198 to calculate.  How do you handle losses in excess of basis?

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When filling out the K-1 worksheet, only enter the allowable amounts (up to the Basis).  That is what the program would do if it had a Basis limitation worksheet.

Manually carry forward excess amounts and manually enter on future tax return when Basis is restored.

[sheri414]

Thanks

[sband3]

Ex:  $6,000 carryforward loss from previous year - $5,000 Income from Line 21 on Form 1120S which is normally entered on Line 1 of Sch K-1. With the 80% limit on income, I can use $4,000 of that carryforward loss against the $5,000 income leaving $1,000 taxable income (which is then added to personal Form 1040 as shareholder income). The remaining $2,000 carryforward loss can be used for future returns.

My question....If we use only the "allowable loss" amount or "income minus allowable loss" ($1,000) on Line 1 of Schedule K-1, then it will not match Line 21 (Ordinary Business Income/Loss) on Form 1120S ($5,000). Am I missing something? 

Not sure where to report the carryforward loss on Form 1120S or Schedule K-1. Or do we?

[JBEA]

How do we get it to print out? 

[jeff-brintonfair]

ProSeries is a joke and I cannot believe they can sell this inefficient and ineffective tax software to anyone!!!  I have found MANY areas that are absolutely unacceptable.  It's like someone giving you an abacus and saying you have to use this to prepare tax returns.  ProSeries is that deficient!!!

[frank1]

We enter a separate entry for Sched E and add back the limitation.  So, if the basis "went negative" by $1000, we would have line 2 read "ABC LLC - basis limit adjmt" and enter $1000 as income.  This gives us a little better trail, and we maintain a worksheet for any unused/limited losses.

[jeff-brintonfair]

That is great, but we shouldn't have to manually do anything for S-Corp basis other than keep track of it in the 1120S software, which should fully download into 1040 module.  All Excess Distributions and Excess SH Loan Repayments should be in the SH's 1040 module after the K-1 is imported from 1120S module.  The 1040 module should automatically limit based on the Basis Sch.

[Harvest]

I totally agree. Is there a way to suggest the change and is intuit responsive to requested changes?

[jeff-brintonfair]

This is my first year using ProSeries.  I previously used Thomson Reuters UltraTax & also Intuit's Lacerte.  Both were great in handling basis.  From what I understand, ProSeries has refused to make any changes, so my guess is our only option is to find another software that meets our requirements, since the IRS will be putting more responsibilities in our laps that ProSeries will not help with.

I realize Lacerte & UltraTax are very expensive, but I looked at Drake and it appears like they provide everything missing in ProSeries (full basis calculations and integration between 1120-S, 1065 & 1040 modules).  I will be looking at Drake Software after tax season.  Their price seems reasonable too.