S Corp - K-1 And Form 7203

[ashajain1]

When K-1 from S Corp has a loss, and shareholder has no stock or debt basis,  Form 7203 is calculating correctly, but Form 1040 is deducting the loss against ordinary income, when loss allowed should be $0, and it should be carried forward

[sjrcpa]

Yes that is a limitation/drawback/failure of ProSeries

[TaxGuyBill]

Yep, ProSeries is not set up to limit due to Basis.  You need to manually do it by only entering the allowable loss (if any) and then manually make a note to yourself to carry it forward on next year's return.

[sjrcpa]

@TaxGuyBill 

I'm curious. If they do that, will the 7203 be correct? I don't know if the 7203 and K-1 input are linked in ProSeries.

[TaxGuyBill]

@sjrcpa 

Excellent question.  If you just leave it alone, no, the 7203 will be wrong (the K-1 amounts automatically flow to the 7203).  We also need to manually change the 7203 (they are fully editable fields, so no overrides are needed).  It will also need to be manually changed when we enter the allowable losses in the future year.

I need to start mentioning that when I tell people about the manual adjustments due to Basis limits.  Thanks.

[davidwashington]

I agree with the unfortunate reality.    ProSeries does not do this well, nor for partnerships.

I have started using a Miscellaneous statement for basis worksheets for partnerships, and am moving most of my partnership and s corp clients to ProConnect or Lacerte since those two products do automate (mostly).

My take is that Intuit doesn't want to address this because it will add to complexity to the program and people might not get losses they have been getting.   The bulk of the turbotax users are folk with returns that are not complex, and we professionals, are a smaller part of the pie using the same product, so cater to the largest set of users first, then easy fixes for the rest of us.