My accountant told me that Turbotax won't adjust taxes for basis upon company sale, and it appears like what he told me is right.
I filled out form 7203 manually, and have 41K in basis, and received 32k in income in my final year of business. That basis should wash the income away, and yet my tax increase from the income has not been washed away, leaving that attributable tax due. I did check the box that said the business was shut down in 2022, which means it should be applying my basis from 7203 to the 1120S somewhere according to my accountant.
Can anyone point me in the right direction to how to pull the Basis from 7203 back in to my final tax return to assure that is being handled properly?
So I followed what my accountant advised, but does anyone know how to then manually get
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The tax return is what provides the basis information not the other way around. You need to enter your liquidating and dividend distributions into your Form 1120S to finalize and close out the business. These liquidations should also be reported on Form 1099-DIV which you will need to complete separately.
To enter your distributions into your 1120S in TurboTax Business you can follow these steps:
you mention basis, and income but not distributions. there is also an issue as to why if the corp was always an S-Corp and you were always the only shareholder why basis would not be zero after taking distributions. in this situation, I would expect yo basis after current year income and distributions to be zero,
distributions do not affect the taxability of the income and the basis is only meaningful if you have losses or for some reason your tax base after income and distributions isn't zero,
Thanks Mike! There was $2,300 in distributions, which I did enter.
I sat down with the accountant today who issued the k1. He also issued the 7203.
His explanation was that the income earned on the k1 from the sale of business assets was offset by my basis in those assets. (Ie- I had bought the assets when the business was founded nine years ago, and reinvested distributions back in the company which I already paid tax on as one of several investors, and that's my remaining basis). The business assets were liquidated for less than my basis in the company, which is why it's a net loss, but on my k1 I have long term sale income from those assets.
The accountant explained, which makes sense based on tax law, how the basis I had in the company would offset the sale of those assets.
However even though TurboTax did give me the opportunity to fill out the 7203 and I filled out the k1 fields, the basis is not offsetting the gain and I can't figure out where it is supposed to be. I can schedule another meeting with the accountant, but since he claimed it was an issue with how "TurboTax handles basis" I might get help here.
If an scorp sells assets (ie asset sale), am I getting incorrect advice on how my asset basis is supposed to flow through? It certainly doesn't make sense for me to be paying tax on that all as income and not getting credit for years of nondistributed phantom income and asset basis? I've never actually received a distribution, although I have received "distributions" that were reinvested, and I've paid tax on those distributions already that are tracked as basis.
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