Form 7203 was created by the IRS in order to have consistent basis schedules.
So if you don't input the required information on the form, you won't have an accurate S corp basis amount; unless of course you are maintaining this somewhere else (such as an excel worksheet).
If you don't maintain an accurate basis schedule, then you can't prepare an accurate return as the basis schedule determines what losses are allowable, whether distributions have tax implications, and then ultimately the overall gain or loss upon disposition.
Seems surprising that an S corp that generated ordinary business income did not pay out distributions to the shareholder's to cover the tax on the income.
Regardless, even the instructions to the form 7203 indicate "It may be beneficial for shareholders to complete and retain Form 7203 even for years it is not required to be filed, as this will ensure their bases are consistently maintained year after year."
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
