I have a question regarding shareholder stock basis on IRS Form 7203. One of my relatives passed away in 2024 and owned shares in an S Corp. These shares were then distributed to my cousins and me. The corporation has retained its S Corp status. My cousins' and my stock basis will be stepped up based on the fair market value of my relative's shares at the date of their death; however, we are still waiting on an appraisal for the corporation. I do not believe the appraisal will be completed before the personal tax filing deadline. The corporation distributed a non-dividend payment to my cousins and me before the end of 2024 which is driving the need to complete and file Form 7203.
I can think of a few ways to handle this, but not sure which is the correct or best option.
1. File for an extension until the appraisal is completed. Once completed, enter the stepped-up value for my shares on line 1 of Form 7203 and check the "Inherited" box on line D.
2. File now using a percentage (based on the number of shares I received) of my relative's ending stock basis from their 2023 tax return, check the "Inherited" box on line D, and either:
a) amend the return once the appraisal is completed, OR
b) update the basis on next year's return (2025) using Part I - 3m "Other items that increase stock basis" of Form 7203 along with an explanation why the basis changed.
I do know that my basis will be greater than the non-dividend distribution made in 2024 so the non-dividend distribution should not be treated as a capital gain as there is sufficient basis to offset it.
Does one of my proposed solutions seem appropriate or is there a better path forward that I have not considered?
