K-1 Debt Basis - How do I write off after S corp was dissolved in 2024?

Forum|Forum|1 year ago
March 16, 2025
1 reply
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I have an S corp that was dissolved in 2024. The client and wife each have a loan balance on form 7203 Part II. How do I write this off on their individual return. AND is this done in 2024 or does it need to be spread out over multiple years?

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sjrcpa

Level 15

How was it addressed on the final S Corp return?

And, most of the time in a final year everything nets out to zero if the shareholders and their ownership % was always the same.

Was it reclassified as contributed capital?

P.S. And/or the shareholders may not have any basis in the debt to write off if they used the debt basis to claim losses.

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

F

fishybizAuthor

Level 2

Thanks for your response.

Nothing was done on the final corp tax return.

The debt basis on the K-1 is equivalent to the stockholder loan on the corporate financial statement. There is no indication that they used the debt basis to claim losses. It appears that the corp did not make lots of money. Managed to cover expenses each year with a small amount of profit passing to the owners (husband and wife) via K-1.

S

strongsilence

Level 10

LC provides a schedule of debt basis. Would answer the question about losses.

But it sounds like you may have received this client, and this is your first year with them?

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