Closed S-Corporation. Confused Where To Enter Capital Loss on Stock

[PGB12]

Hello All!

In 2009, I opened an S-Corporation with 1,000.00 contribution from my personal money. On December 31, 2022, I closed the company. I filed the proper IRS forms: 966, 941, 940, 1120-S with "Final" checked, K-1 with "Final" checked. The company owns no assets that are not fully depreciated.

But, I forgot all about the one share of stock the company issued to me. I've accurately tracked cost basis and find the final basis, form my figures, is 84,0333.00. On our personal returns for 2022, the Form 7203 shows 77,843.00 for the basis limitation.

Since I forgot about the stock, I did not issue myself a1099-B.

In Turbo Tax, would I handle the loss on the stock as  I do for any other stock sale? Do I issue a 1099-B to myself in 2023, even though the company closed at the end of 2022?

Thanks for helping me figure out how to handle this in Turbo Tax. I appreciate it.

Paul

[AliciaP1]

You need to issue yourself (from the S-Corp) a 1099-DIV reporting the dividend distribution you received (from your retained earnings of the business).  

Also, you should have reported the assets (even completely depreciated) as sales at fair market value to you for their distribution on the S-Corp final tax return (as per the instructions on Form 966 filed when you decided to dissolve the company).   The S-Corp will compute the gain or loss on the assets (gains or breakeven since you say they are fully depreciated) based on the FMV and report that on the K-1.  If you did not do this, you will need to amend your final S-Corp return.

Once you have your final K-1 with everything reported correctly and the distributions noted on your Form 7203 (including any property distribution values), you will use the ending basis as the value of your stock entered for the stock "sale" and TurboTax will calculate your gain or loss as appropriate.

Closing a business is a tricky thing, so you may find it beneficial to find a tax professional in your area who can help you wrap things up.

[PGB12]

Thank You AliciaP1 for taking time to reply. You are a very good teacher.

Since the business physically had no money, no inventory and no equipment when it closed, I don't know how much money to put on the 1099-DIV since there is nothing to distribute. The only thing I can think of is the 1,000.00 that is Capital Stock on 1120-S Schedule L Line 20. Or, am I distributing the Retained Earnings of 84,033.00?

What do you think?

Thank You Again,

Paul

[RobertB4444]

You already paid taxes on the retained earnings.  The capital stock is worthless so you don't have to worry about that.  The dividends are the shares of the income that you are distributing.  Since you have no income you have no dividends to distribute so no need to file 1099-DIV for anyone.

@PGB12 

[PGB12]

Thank You RobertB4444 for explaining some more details. I appreciate your help.

Thanks to your and AliciaP1's help, I have a much better understanding & clearer picture in my head.

Paul