Final k-1 after dissolution of s-Corp. How to enter basis.

[mailrandyh]

s-corp is dissolved and liquidated in 2018. K-1 line 8a has liquidation amount. Don't see anywhere to reduce by basis amount, except in 'Supporting details' pop-up. Is there a form to enter basis as loss against capital gains after dissolution? 

[Rick19744 · Accepted solution]

Not sure if you prepared your final S corp return or if you were just provided the K-1.

Regardless, the K-1 is not correct.  Liquidating distributions do not get reflected on the K-1.  The liquidating distribution is to be reported on 1099-DIV in the liquidating distribution box.

Your K-1, and 1065, should be amended.  The only thing the K-1 should report is activity related to the winding down of any operations.

The problem with your current K-1, is now the IRS will be looking to match this capital gain which is not correct.  In addition, reflecting a capital gain on the K-1 means that you must report this gain and increase your basis.  Based on your limited facts, this is not correct.

I don't know what else is on the final K-1, but what should occur is that you update your basis schedule for the applicable lines of the K-1 (not any liquidating distribution) and compare this to your liquidating distribution.  If you have basis remaining after subtracting the liquidating distribution, you have a capital loss.  If your basis goes below zero, then you have a capital gain to the extent of the negative amount.  Which ever it is, this then gets reported on Sch D and the applicable 8949.

I don't know the amount, but I recommend you consult with a tax advisor.  It is getting into a difficult time of year for those individuals, so you may want to consider filing an extension to allow time to get this properly handled.

[rkrkrkCA]

Similar question - my K-1 does not have the erroneous entry on line 8, but it's still unclear to me whether to enter my "BEGINNING of 2018" basis or the "END of 2018 basis" (both of which I know) when TT asks for my "S corporation basis." It's also unclear how to answer the "Acquisition date," since with annual recalculation of basis, the long-ago date seems irrelevant. And - I as a shareholder, have no idea what the "sale price" was that TT wants me to enter (is that somewhere on the K-1?)

[sagoff]

I came across this while researching a similar situation. I am finishing my 2023 final Dissolution S Corp return. I am attempting to record my Liquidating Distribution; TurboTax Business instructions say to record the Liquidating Distribution on the K-1, line 16, with a code of D. 

In the response by Rick19744 in this posting, he said to report the Distribution on the 1099-DIV, rather than the K-1. But TurboTax Business does not appear to support adding a Form 1099-DIV. I wondered if that is because I am using the 2023 release, which is still not finalized. So I tried it in my 2022 version. It does not allow inserting 1099-DIV in that version, either. 

What am I doing wrong, or what am I missing?
Thank you! --SAGOFF

[DaveF1006]

No.  You will still report the liquidating distribution on K-1, line 16, with a code of D.  What Rick19744 is referring to is that you would need to provide each shareholder a 1099-DIV reporting a liquidating distribution so they can report these on their own individual tax returns.

There is a section in your 2023 Business return that will allow you to generate 1099 DIV as well as other forms such as W2's or other 1099 forms.  Here is a screenshot on what that screen looks like. 

@sagoff 

[sagoff]

Thank you, Dave! I followed the steps cited: opening my 2023 TurboTax Business, started a new file, and logged into QEF. I tried to import my 2022 TT Business filing for my company. It failed with this message: Failed to import data from tax file. Error occurred while parsing the data from tax file.

I tried it three times, including from a backup file. It opens fine with my 2022 TurboTax Business. A question: Should I be starting QEF from 2022 TT Business?

It is only one 1099-DIV; is there any other way to create that?

Thanks again, 
Stacy

[DaveF1006]

Yes, you can create your own 1099 DIV and issue it to your shareholder. You will need to send one to your shareholder, a copy to the IRS, and to the state where your shareholder lives. Here is where to download all copies to be sent to the IRS, State, and your shareholder.

Please read these instructions for filing the 1099's. There is a lot of material to read but toward the end of the document states when the form needs to be submitted to the recipient and to the IRS. In this case, your shareholder needs to receive the 1099 DIV by January 31 and it needs to be received by the IRS by March 15. The state may have a similar date but you may wish to check the state where the shareholder resides. It also gives you the mailing address where to send this to the IRS. Just look under the section Where to File. There are also instructions how to file these electronically.

@sagoff