The new form 7203.

[JMS23]

With our K-1, we 'materially participate' and all of our investment is 'at risk'.

I have input all K-1 data the same as usual and reflecting a loss which has always been all allowed.

With the new Form 7203, a new page shows saying that the 'allowable loss' is $0, and to adjust my K-1 to that.

This is not correct. 

It is the form 7203 causing the issue.  Why is it not reflecting the loss as allowed?

[ThomasM125]

You need to look at the form 7203, part 1 to see if the stock basis at end of the year is $0. If so, that might limit your loss deduction as it may indicate that you are not at risk in the business. In that case, you would have to examine the entries in part 1 to determine why your basis in stock is $0, as you claim you are at at risk in the venture. 

[Rick19744]

To expand on the initial response:

• Form 7203 is a new form for 2021
• Prior to the form 7203, each shareholder was responsible for maintaining their own basis in the stock in what ever format they chose.
• If you were taking a loss, then each shareholder was required to attach the basis schedule to their 1040.
• Form 7203 is now required, in almost all cases, to be included with the return as a replacement to attaching each taxpayer's own version of their basis.  
• So for you, the key is now taking your 2020 end of the year stock basis and put this on line 1 of form 7203.  I am not sure if form 7203 pulls in all the appropriate items for 2021 activity.  If not, then you need to complete the other lines for 2021 activity to reflect your end of the year basis.  This needs to be positive in order to take your loss.

[JMS23]

Thank you for the response.

I do not have anything in that column, so that may be it.

[JMS23]

Thank you for the additional details!

In TurboTax for prior years, where would the basis be input and attached? 

I am concerend as I have input to TT the same each year and have never seen anything
like that being needed.  There is nothing to check or input an amount.

I went to look at the schedule from prior, the box for attaching that is Not checked.

The K-1's we get have only line 1 and line 17 populated.  We then file a combined 1040. 

(Married, the business is 50/50 split)

In what instances is this Not required?  Could we possibly not need to do this?

Thanks!!

[TaxUser351]

Your question: In TurboTax for prior years, where would the basis be input and attached? 

This information was not entered into TT in previous years. My S Corp's CPA provides cost bases sheet for each shareholder with K1.  But, that information may not be 100% accurate. Each shareholder is responsible to calculate his/her cost bases every year using IRS instructions. 

Only difference this year is that we need to provide that cost bases calculation for 2021 to IRS with our personal return in From 7203. 

It is OK if you have not calculated cost bases for all previous years. Print a copy of 7203 and use that starting with 1st year of your S Corp. if you have only few yeas it may be easy, if you have 10/20 year old S Crop you may have to work hard to calculate for all those years... but trick is you need to start from the 1st year you owned this stock and go all the way to 2021. good luck!

[JMS23]

Thank you!!