Schedule K-1 2023 Final K-1 Checkbox - Disposition of S-Corp interest information

[jmzchz5560]

Closed this LLC with S-Corp election ending 2023. In final review, TT will not let me skip Part II Disposition of S Corporation Shares section. I had no shares in the LLC, was only managing member. Form 7203 was completed. Basis beginning of Year $9309, Stock basis end of corporation tax year is $0  == TT will not let me e-file my final returns. due to this item?  Please help?

[jmzchz5560]

A little more information. CPA who did K-1 S-Corp also completed Form 966  Corporate Dissolution or Liquidation under code of Section 331 -- with the Form 7203 showing Stock Basis beginning of year $9309, end of year $0 - again no shares listed on this entity.

[LeticiaF1]

Can you please clarify, what error you are getting in the program? 

[jmzchz5560]

Leticia,

The problem in the program is that when entering the Schedule K-1 information, and checking Final K-1, the program requires that you click on K-1 Additional Information to enter at least one of choices of Disposition on Part II, Line 1a, 1b, or 1c be chosen. However, in the Easystep process of entering the K-1 it has choices of these 3 choices plus "None of the above" on how did you dispose of K-1 shares.  As stated this entity is a single member LLC, filing as S-Corporation status for tax purposes, with a Corporate Dissolution Liquidation Form 966 and a completed Form 7203 completed. Even though the 7203 form was completed in TT properly - the program will not let you e-file unless share disposition choice 1a-1b-1c is chosen. How do you override this to allow e-file to complete?  Attaching some screen shots.   

[Rick19744]

A few questions:

• Your facts don't make sense.  Why are you receiving a K-1 if you indicate "I don't own any shares"?
• If you don't own any shares, what is the basis related to?
• How many years have you received a K-1?
• What other boxes on the K-1 have amounts in them?
• Did you receive a distribution in the final year?
• If this is a final K-1, you can't skip the disposition of S corporation shares section.  That is the only way to handle this transaction correctly within TT.

[jmzchz5560]

Hi Rick,

The entity is a Single Member LLC filing as an S-Corp for tax purposes. The LLC has no declared "shares", and as only member, I have 100% interest in the LLC ---- I have received a K-1 each year since I opened the LLC in 2021.

On K-1 I have values in Part III - Boxes 1,7,10, 17 -- In terms of final year distribution I just dissolved the S-Corp as CPA filed the Form 966 Corporate Dissolution or Liquidation.  In entering the K-1, it has screen - Describe S corporation Disposal, with 4 choices - Sold Outright, Sold and Receiving Payments, Disposed of it but not by selling it, and "NONE of the ABOVE" -- which is what I checked. The first 3 choices are the only ones that can be selected -- TT should either have a 4th choice on K-1 Additional Information Part II Dispostion of S Corporation Shares - which would be None of the above or Dissolution.  But it stops you from e-Filing there requiring one of those to be selected.  In my case, none of those apply. This seems to be something TT technical needs to address. So I have only option of printing my return and mailing it to IRS?   

[Rick19744]

Responses to your follow-up reply:

• While you may not technically own any shares, for tax purposes you in fact own 100%; so essentially all or any shares. 
• You should select "disposed of but not by selling".  Don't get hung up on nomenclature.   Disposed and liquidated result in the same tax impact.
• Next what you need to do is update your tax basis for the applicable lines on the K-1, EXCEPT for any distributions.  The beginning point for this is the beginning of the year basis figure of $9,309.
• The screen shot you shared (K-1 input screen) will then need to be completed and you have all this information for lines 2-7.  Not sure if TT will automatically populate line 8; assuming it does.
  • line 2 is the date of the liquidating distribution
  • line 3 is the date you elected S corporation status; assuming this is the same date as you organized your LLC
  • line 4 - just enter "purchased"
  • line 5 is your liquidating distribution
  • line 7 is your basis as determined above
• Unless you input the above, TT will not be able to determine you overall gain or loss on the transaction

[jmzchz5560]

Rick,

Thank you for your follow-up again. Just to let you know TT does not calculate Line 8 from the information entered in Form 7203 as in my case, the Beginning Year basis was $9309 (Line 1), Line 4 - $110, Line 5 was $9419, Line 6 Distributions was $0, Line 10 - Basis before Loss and Deduction Items $9419, Line 11 - Allowable Loss and Deduction Items - $4098, Line 13 - Other Items that decrease stock basis - $5321, Line 14 - $9419, leaving Line 15 - Stock Basis end of Corporate Tax Year - $0  So, Part II as loaded as you recommended resulted in No Errors on final check clearing it to be e-filed.  Here is what it looked like after your suggestions.  

[Rick19744]

Obviously I can't verify some of the details you provided in the follow-up, but it appears to be handling it correctly and no errors.  So that is a good thing.

What is included in "other items that decrease stock basis"?