Thank you for your explanation, but I still do not understand. I do not have at risk losses carrying over from last year, so why would I check this box? I do have losses that were previously not allowed due to basis limitations that I would like to claim now that I have restored basis. How do I do this? I thought this was through the use of Form 7203 to determine the allowable loss from stock basis.
I understand that I may not have to submit Form 7203, but I believe I should still use it since it replaces the old worksheet used to calculate basis.
But maybe I am misunderstanding something. Is "an aggregate loss not allowed last year because of basis limitations" different from the "carryover amounts (column (e)) from the previous year" which is found on Form 7203 Part III Column B? But if those definitions are the same thing, then it seems I would have to submit Form 7203.
This is from IRS instructions for Schedule E Part 2. Can you please help me understand what I am missing, because it seems like this does apply to my situation?
The basis of your stock is generally figured at the end of the corporation's tax year. Any losses and deductions not allowed this year because of the basis limit can be carried forward indefinitely and deduc- ted in a later year subject to the basis limit for that year. To figure your aggre- gated stock basis, you can generally use Form 7203. For more details on the ba- sis rules for S corporations, see the In- structions for Form 7203.
If you are claiming a deduction for your share of an aggregate loss (or you
receive a distribution, dispose of stock, or receive a loan repayment from an S corporation), check the box on the ap- propriate line in Part III, column (e), and attach Form 7203 to your return.
If you had a loss from an S corpora- tion that was not allowed last year be- cause of the basis rules, but all or part is allowed this year, see Line 27, later, for how to report it.
Line 27
If you answered “Yes” on line 27, fol- low the instructions below. If you do not follow these instructions, the IRS may send you a notice of additional tax due because the amounts reported by the partnership or S corporation on Sched- ule K-1 do not match the amounts you reported on your tax return.
Losses Not Allowed in Prior Years Due to the Basis or At-Risk Rules
Enter your total prior year unal- lowed losses that are now deductible on a separate line in column (i) of line 28. Do not combine these losses with, or net them against, any current year amounts from the partnership or S corporation.
Enter “PYA” in column (a) of the same line.
Thank you for your help!
