1120S loss but no basis?

Forum|Forum|1 year ago
February 22, 2025
2 replies
13 views

First time I have a loss on an 1120S, however, the shareholders do not have any basis anymore. So they should not be able to deduct the loss. I can't seem to find in Proseries where to indicate this? Does box 1 of the K1 still report a negative number and this gets handled on the 1040? Or is it done on the 1120s and then box 1 reports $0?

Thanks!

ProSeries Professional

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IRonMaN

Level 15

Did you complete a 7203 on the shareholder's 1040?

Slava Ukraini!

rbynaker

Level 13

But even with the 7203 is there anything that links back and limits the loss in excess of basis on Sch E? This has been a manual process with ProSeries forever unless that's changed in the past couple years.

I think TGB suggests you reduce the loss on the K-1 Wks to the allowed amount. I've always added a second K-1 line for ABC Corp - Loss in excess of basis with an offsetting positive number. I've seen some people suggest using the 6198. Not quite the right approach but it probably gets you to the same tax result.

Circling back, if they didn't lose their own money, whose money did they lose?

Rick

B

bryceAuthor

Level 4

They have a LOC, and I don’t believe they are personally liable.

J

jeffmcpa2010

Level 10

In part II

have you checked "Some Investment is not at risk"

I haven't had this for a while but I am pretty sure I then completed the 6198, but my experience would have predated the 7203, so I am not sure what the current best practice is.

B

bryceAuthor

Level 4

I haven’t yet. I’ll look tomorrow at this.

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