See the following for guidance:
The stock basis in the S corporations should have been known for every tax return filed.
Form 7203 is filed by S corporation shareholders who:
Are claiming a deduction for their share of an aggregate loss from an S corporation (including an aggregate loss not allowed last year because of basis limitations),
Received a non-dividend distribution from an S corporation,
Disposed of stock in an S corporation (whether or not gain is recognized), or
Received a loan repayment from an S corporation.
If one of these requirements applies, then Form 7203 is required.
Basis is handled as follows:
Basis is increased by (a) all income (including tax-exempt income) reported on Schedule K-1 (Form 1120-S), and (b) the excess of the deduction for depletion (other than oil and gas depletion) over the basis of the property subject to depletion.
Basis is decreased (but not below zero) by (a) property distributions (including cash) made by the corporation reported on Schedule K-1 (Form 1120-S), box 16, code D, minus (b) the amount of such distributions in excess of the basis in your stock.
Basis is decreased (but not below zero) by (a) nondeductible expenses, and (b) the depletion deduction for any oil and gas property held by the corporation, but only to the extent your share of the property's adjusted basis exceeds that deduction.
Basis is decreased (but not below zero) by all losses and deductions reported on Schedule K-1 (Form 1120-S).
If Form 7203 is needed then your best efforts to calculate the stock basis is needed. Previous tax returns should contain the information needed.
