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The Form 7203 is used to track your basis in the S corporation which can be important when you take distributions or deduct losses from the company. You can only deduct a loss from ordinary income to the extent you have not exceeded your basis in the company and distributions will reduce your basis. If your stock basis is wrong on the Form 7203, you should correct it by making an adjusting entry in box 12 or 13 on the Form 7203 to adjust the basis to the correct balance at year end.