As a shareholder in an S corporation, you are required to maintain a basis schedule. This represents your economic investment in the S corporation. The basis schedule begins with the original contribution, is updated annually for the applicable lines on the K-1, which includes any distributions.
Liquidating distributions are NOT to be reported on the K-1. These are reported on form 1099-DIV in the liquidating distribution box.
Once a shareholder has received their final liquidating distribution, this is then compared to their basis. If after subtracting the liquidating distribution you have basis remaining, you have a capital loss to report. If the basis goes negative after subtracting the liquidating distribution, you have capital gain to the extent of the negative amount.
*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.
