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Level 2
December 20, 2024
Question

S Corporation Basis Limitations

  • December 20, 2024
  • 2 replies
  • 21 views

Is there a way in Proseries to have the software apply a S Corporation loss limitation due to basis, as computed on Form 7203, to the Schedule E, Page II and ultimately the actual 1040?

I have a situation where my S Corporation shareholder has a ($10,000) loss on their current year K-1 which I enter into the S Corporation K-1 worksheet.  I then go to Form 7203 as required by IRS due to the K-1 loss.  I complete Form 7203.  For simplicity my client has $6,000 of S Corp basis coming into the year and no other S corporation activity that would affect basis during the year other than the ($10,000) loss.

Form 7203 correctly adjusts the current year basis down to $0 and in Part III which is the allowable loss section also correctly computes the $6,000 current year allowable loss from stock basis and a $4,000 carryover amount.

However the entire ($10,000) loss still ends up on Schedule E, page II and on the 1040.  The software is flowing through the entire loss even though form 7203 computes that only $6,000 of the $10,000 is allowable/deductible in the current year.

Also, the shareholder materially participates in this business so it isn't a Form 8582 passive loss situation.  The loss is limited only because of insufficient basis.

 

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2 replies

IRonMaN
Level 15
December 20, 2024

Enter the $6,000 loss on the K-1 worksheet in the 1040 module instead of the $10,000.

Slava Ukraini!
Level 2
December 20, 2024

What about the QBI deduction?  Do you also enter the allowed loss from 7203 on the QBI section?  If so then it seems like you manually need to track and modify the QBI loss carryforward the following year.

Intuit Community Champion
December 20, 2024

The 199 info on line 17 code VV will show your clients QBI loss, and I believe program will automatically carry over loss on his 1040 

Intuit Community Champion
December 20, 2024

I also do same as Ironman, but I click on supporting statement ( to left of line 1) and note basis limitation just so I have record of reason line 1 is different from actual K1 received