Separately figured items of income that are positive are reported in Part I. Negative amounts are reported in Part III.
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IRS Form 7203 Instructions states:
Line 3
Enter on lines 3a through 3m all separately figured and non-separately figured items of income from Schedule K-1 (Form 1120-S). See below for specific instructions.
Reminder
Enter only positive amounts from Schedule K-1 (Form 1120-S) on line 3. Negative amounts (decreases to stock basis) are entered in Part III.
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