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Level 2
posted Mar 30, 2025 4:39:58 AM

Distribution in excess of Basis

I had basis of $100,000 in my S Corp at the beginning of 2024. The company lost $45,000 for the year and I took distributions of $125,000. The K- 1 I received shows the ordinary loss on line 1 of $45,000 and the distribution of $125,000 under line 16 code D.

How do I report this $25,000 excess distribution as a long-term Capital gain and is the $45,000 carried over to 

2025?

0 1 804
1 Replies
Expert Alumni
Mar 31, 2025 8:38:16 AM

Yes, if you received a distribution that was more than your adjusted basis, you have taxable income. In most cases, this is a long-term capital gain, which is reported on Schedule D (as a sale with no basis).

 

To enter this, open your return and search on "investment sales," then use the jump-to link to go to the start of this section.

  1. Choose "Other" and follow the prompts to enter a description (ie: Distribution in Excess of Basis), the amount and the date you received the distribution. 
    Note the excess is calculated as of the end of the year, which would the amount from Line 16(D) less your beginning capital balance plus the loss for the year.
  2. Continue to enter a Cost Basis of zero (because you have no remaining basis) and the date you first invested in the company.
  3. TurboTax will show a summary page that shows how this will be reported on your return.

 

See IRS Pub 541 Partnership Distributions and Partnership Adjusted Basis

 

The loss from Box 1 is a passive loss. Any unused loss would carry forward until you have passive income to offset the loss carryover.