Get your taxes done using TurboTax

Pass-through entities become complicated quickly:

1. As noted by @tagteam , form 7203 is a new form to provide the IRS with some standardization on basis tracking.
2. Actually, if your distributions exceed basis on line 5, then line 7 becomes zero and this then flows through to line 15.
3. I am not sure how TT software operates here, but it is doubtful that TT takes any excess distributions at this point and reports this on form 8949.
   1. Not sure how TT wants you to enter the amount on line 6.
   2. I'm assuming that line 6 equals the amount on the K-1 and then TT just enters zero if it exceeds line 5.
   3. As noted, doubtful that TT will take any excess and then report on form 8949
4. As to when this is taxed, it is taxed in the year that the distribution exceeds your tax basis.  Generally this is treated as LT capital gain if you held your S corporation shares for more than a year.  Technically you need to track S corporation basis by share lots.
5. So if you are saying nothing is reflected on your Schedule D, then you will need to manually input the excess distribution on form 8949 and it will then flow to Schedule D.
6. Additionally, if you also have any suspended losses as a result of no basis, then you should be completing form 6198 as well.