I transitioned from a sole proprietorship to a single owner S-Corp in 2016. What do I use for the initial shareholder basis for Form 7203?

[SmallBusinessSCorp11]

My small business was a sole proprietorship from 2001 to 2016. In 2016 I transitioned to an LLC S-Corp. I am the single owner and 100% shareholder. My business showed a loss in 2021. I entered this from my K-1 and TurboTax is asking me to complete Form 7203. I do not  know my stock basis and am trying to calculate it from my previous years K-1 statements. However what do I use for my initial shareholder basis? As I did not purchase the company/shares in 2016, I just changed the status of my business.

Thank you very much for any guidance.

[PatriciaV · Accepted solution]

In general, your basis in a sole proprietorship would be the total net assets. This may include cash, inventory, receivables, or capital assets less depreciation, less outstanding debt. Your accounting records for the period ending when you converted to a SMLLC should help you determine your net assets. If you believe you had no net assets at this point in time, you can use zero as your beginning balance for the SMLLC.

[SmallBusinessSCorp11]

Thank you this was very helpful.