I'm tired, so I'm trying to figure out if this is wrong or if I'm missing something. I have a K-1 from an S-corporation. The next page is an attachment saying "Excess Distributions Taxable to Capital Gains" with a $300 dollar amount. The next page is a nice Basis calculation showing $10,000 Stock Basis at the beginning of the year, all of the math, and $7000 Stock Basis at the end of the year. Something is messed up, right? There wouldn't be taxable excess distributions if there is Basis, right? Or am too tired and missing something? Last year's 1040 did not include a 7203 (even though it should have). S-Corporation (always sole owner) is 15 years old and it doesn't seem likely that Basis could easily be re-calculated. Any thoughts?

Level 15

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Basis in S-corporation

Forum|Forum|1 year ago
April 12, 2025
3 replies
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I'm tired, so I'm trying to figure out if this is wrong or if I'm missing something.

I have a K-1 from an S-corporation.
The next page is an attachment saying "Excess Distributions Taxable to Capital Gains" with a $300 dollar amount.
The next page is a nice Basis calculation showing $10,000 Stock Basis at the beginning of the year, all of the math, and $7000 Stock Basis at the end of the year.

Something is messed up, right? There wouldn't be taxable excess distributions if there is Basis, right? Or am too tired and missing something?

Last year's 1040 did not include a 7203 (even though it should have).

S-Corporation (always sole owner) is 15 years old and it doesn't seem likely that Basis could easily be re-calculated.

Any thoughts?

ProSeries Basic

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Best answer by IRonMaN

Materiality levels increase the closer you get to April 15th 😁

abctax55

Level 15

Bill, I'm tired, too ;-). but then again, aren't we all right now.

Any idea if there have been any shareholder loans in the 15 years that might have used up basis?

And, what trust level (if any..) do you have in the preparer of the K-1?

Plus - does $ 300 in capital gains have any impact overall?

HumanKind... Be Both

IRonMaN

Level 15

"Any thoughts?"

Yup. Ignore the $300. Next return.

Slava Ukraini!

T

TaxGuyBillAuthor

Level 15

Thank you both.

While there are some minor questionable things on the 1120-S, I believe the preparer is fairly competent. But that is why I was extra-confused why it seems like they were saying there was no Basis (with $300 in excess distributions) while at the same time providing a Basis statement showing $7000 of Basis.

Thanks again.

abctax55

Level 15

Bill..... maybe it's 'cuz they are as tired as we are 😉

The mood I'm in, I'd probably ignore $ 3000. Maybe even more.

Hang in there, my friend.

HumanKind... Be Both

IRonMaNAnswer

Level 15

Materiality levels increase the closer you get to April 15th 😁

Slava Ukraini!

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