DISTRIBUTIONS OVER BASIS

[M PENSKE]

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

[sjrcpa]

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

[M PENSKE]

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]

@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.

[JRC]

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.

[JRC]

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.

[abctax55]

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

[Pablo]

Follow up on entering S Corp S/H's distribution in excess of basis on form 1040 as C/G. Grasp everything except where to enter this on 1040. 

[abctax55]

F 8949 >Sch D 

So same data entry point as a regular/normal stock sale.  Tag as "not on F1099-B" tho.

(I don't use PS, so can't be more help)

[Pablo]

THANK YOU VERY MUCH