Level 5

Where to record S Corp losses and basis limitation on 1040

Forum|Forum|5 years ago
May 6, 2021
1 reply
8 views

The client has a loss that exceeds his basis. Where and how do I enter this on K-1 or 1040? Where does the carryover loss show in Proseries? How to properly record and carry this forward on K-1 or 1040? If enter the K-1 as is, it populates the whole loss on Schedule E.

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T

TaxGuyBill

Level 15

When filling out the K-1 worksheet, only enter the allowed amounts.

Manually keep track of unused loss to enter on future tax returns when Basis is restored (as "PYA", per Schedule E Instructions).

M

MarinaEAAuthor

Level 5

oh wow, all manual huh. Wouldn't that cause a discrepancy with the IRS being that different amounts are on K-1 filed with 1120S vs K-1 filed with the 1040?

Also, I am hearing that I need to file 6198 with it which will take care of the basis limitation. Is that so?

T

TaxGuyBill

Level 15

The IRS doesn't complain if you claim MORE income (or less loss) than what they know about. Besides, when claiming a loss you are required to attach a Basis statement to the tax return anyways (another thing that ProSeries does not do).

No. Although some people use Form 6198 as a work-around of ProSeries limitations, that is the wrong way to do it. Form 6198 is for "At-Risk" limitations, which is different than Basis limitations.

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