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posted Mar 20, 2023 3:20:30 PM

How to enter liquidating distributions in TT premium

I was one of 95 shareholder in a s corp.  In 2022, we liquidated the sCorp through an asset sale. I received a K-1 with amounts or net capital gains, sec 1250 un recaptured gains, and net 1231 gains.  There is also note that says I should subtract my stock basis from an amount given as liquidating distributions and enter the amount on schedule D.  As far as I know, you don’t enter values directly on to Sch D in TurboTax, but I don’t know how to enter this information using the interview process in TT either.  Also, this subtraction would result in a negative amount, and where on Sch D would this be entered if I could?

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1 Replies
Level 13
Mar 20, 2023 4:43:20 PM

A few comments:

  • As a shareholder in an S corporation, you should be tracking your stock basis.
  • You are correct in that you should not enter anything directly on Schedule D.
  • You will update your stock basis for the applicable lines on your final K-1.
  • When updating your stock basis for the final K-1, do not adjust the basis for any liquidating distribution.  See next bullet.
  • Hopefully the liquidating distribution was reported to you on form 1099-DIV; which is the proper method to report this.  It should not technically be on the K-1 as a distribution.
  • When you indicate that this is a final K-1 in TT, there will be some additional questions.
  • One of the questions will be how you disposed of the S corporation stock.  Don't get hung up on semantics with the options as long as the end result is correct.
  • At some point TT will ask for the selling price (even though this was a liquidation).  This amount is your liquidating distribution.
  • Then TT will ask for your cost basis.  This is you stock basis.
  • You will enter the final K-1 amounts just as you have in past years.
  • TT will handle the rest
  • If you truly have a negative amount as you indicate, this means that you have a capital gain.  So check for this on Schedule D.