Thank you, @AliciaP1
I was able to follow the example in https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-stock-and-debt-basis. However, I don't see how it applies to my situation.
ASSUMPTIONS
Let's say I put in $0 when the company was incorporated and S-corp was elected. So my initial basis is $0. So Form 7203 line 1 (Stock basis at the beginning of the corporation’s tax year) is 0.
Now, in the first year, the company reports 1,000 in income and 5,000 in expenses. The reported loss is 4,000.
However, in order to cover the expenses, I give the company 4,000 from my pocket.
QUESTIONS ABOUT FORM 7203
What is the change in the basis for year 1?
Q1. Does the 4,000 I laid out for expenses get added to the basis?
If yes, then which line does it get added to?
Does it get added to line 2 (Basis from any capital contributions made or additional stock acquired during the tax year)?
Q2. I assume the 4,000 loss is reported in line 3a and subtracted from the basis. Right?
QUESTIONS ABOUT K-1
Assume my K-1 for year 1 currently shows the following:
Line 1 Ordinary business income (loss) = -4,000
Checked "materially" participated in the business activities
Lines 2 through 16 = 0
Line 17V Section 199A information = -4,000.
Q3. Do I need to report somewhere the 4,000 expenses paid from my pocket?
QUESTIONS ABOUT 1040
I answered yes to "materially participated" and "at-risk"
Q4. Can I report the -4,000 loss because my stock basis is 4,000?
