Form 7203 is stating a gain cannot be listed in Part 1 and a loss in Part 3. The gain in Part 1 is accurate, and values in Part 3 won't let me update them. What do I do?

[ebrandt]

In regards to S Corp K1 Form 7203 prompting for review.

[AliciaP1]

You should delete your Form 7203 and re-enter the information for your basis calculation.  Remember, the basis calculation is for 1 year so you cannot have a gain and a loss in the same year.  To delete the form and re-enter in TurboTax Online please follow these steps:

1. Within your return in TurboTax Online click on Tax Tools in the black menu bar on the left side of the screen.
2. Click on Delete a Form. 
3. Scroll down to your Sch K-1 Wks-S Corporations (Xxxxx) -- Form 7203 and click Delete.
4. Click Federal in the black menu bar on the left side of the screen.
5. Click Edit/Add on the Schedule K-1 line.
6. Progress through the questions for your S-Corp K-1.
7. You will get to the information for your basis schedule (Form 7203) again and you can re-enter the correct information.

[ebrandt]

This is helpful, but I had gone back to correct the form before your reply.  I know only show the income in Part 1 and "0" for losses in Part 3, but I am getting the same message about not being able to have a loss in Part 3.  This seems like a glitch in the software.

[PatriciaV]

Please clarify if you have entered zero for the losses in Part 3, or if you deleted all numbers from that box.

[georgefrench24]

It sure does seem like a software glitch. I am getting the exact same error no matter how I enter it. I am actually a software developer, so to test this, I have just messed with it, changing data in all the lines with just any numbers that the error says is incorrect, to make it work, and it just keeps giving the same error, but for a different line 3 sub item.  It tells me to change section I and If I do that, then it tells me to change section 3. It goes in a circle. I now have the correct data on the form, same as my partner that has already filed and I have triple checked everything.  I am just going to file and ignore the 5 warnings that are coming from the form. I have reviewed the numbers and everything on the form seems correct and matches my partners. I need to put my full amount of Line 3 A, and it says not to enter a loss there. But if I change that to zero or negative, nothing works. For zero, I get a message that line 3g cannot have a gain in Part I and a loss in Part III. But 3g has a zero. If I put a number there it goes down to another 3(x) item giving the same error.  The form is now correct, but it says I have errors. 

[GmWells]

I am getting this same error for the 2022 tax year.  "Turbotax Form 7203 error message says Line 3g cannot have a gain in Part I and a loss in Part III."  The only way to "trick" the program is to show Part III Current Year losses and Deductions (Column a) as Column b amounts (Carryover amounts from the previous year).  I know this is not the right solution and will likely create questions with the IRS when I e-file.  The fact is that I DO have Net Capital Gains to show in Part I, line 3g, as well as losses in Part III.

Any thoughts?

[GmWells]

P.S.  I am not using TurboTax on-line, but the Windows-based version I bought.

[JamesG1]

Gain reported on Part i line 3g should provide basis for an ordinary business loss reported on Part III line 35.

Do you see an allowable loss from stock basis line 35 (c)?

@GmWells 

[GmWells]

No--the Form 7203 I received from my S-Corp company has nothing in line 35, Part III.  My K1 shows a net short-term capital loss on line 7 and a net long-term capital gain on line 8a.  The value in line 7 on the K1 is reflected as a loss on line 38, part 3 of the form 7203 and the value in line 8a on the K1 is reflected as a gain on line 3g, part 1, of the form 7203.  My K1 doesn't have any ordinary business losses, only ordinary business income, as reflected on line 1 on the K1 and again on line 3a, part 2 of the form 7203.

The bottom line is that the Form 7203 as filled out in TurboTax, is exactly the same as the Form 7203 I received from my company, along with my K1.  It should be correct, but TurboTax keeps giving me the error message as I described.

Make sense?

[applefam5]

The problem GmWells is having is almost exactly the same as I am having, accept one other detail - I have a deduction represented in line 45 of PartIII, which comes from line 12-S of my K-1.

The only way I have been able to make TT not report an error is to completely blank out line 3g in Part1 of 7203; but doing this does not give me warm fuzzies.

My inclination was to leave the error on the form and e-file anyways -BUT- the error prevents TT from performing the e-file.

I am using the downloaded Deluxe version on Windows.  I do ALOT of software developement and QA work... this "smells/feels" very much like a bug.

If there is a way to over-ride TT and submit the e-file, please let me know how.  No way am I going to submit with a 7203 that is different than the 7203 that our companies very reputable and expensive accounting firm provided.

[GmWells]

Totally agree with applefam5!  I have a Form 7203 that my company's "very reputable and expensive accounting firm provided," along with my K1 (and K3), and I am VERY uncomfortable "tricking" TT to change the TT version of the 7203 to avoid an error that I strongly suspect is not valid and is a glitch with the program.

Please respond.

[Letsgo8]

TT-I'm having the same issue as the 2 prior individuals.  I also have entries on Part III lines 41, 45 and 46.  I'm trying to recreate the 7203 provided to me today by CLA, the accounting firm that prepared the K1 for my firm.  Look forward to your response.  Wondering if I need to pay for a live chat...  This is the only issue holding up filing my returns...

[Letsgo8]

After I entered my last post, I decided to pay the $50 and call a TT expert.  After an hour discussion, we resolved this issue.  So-Form 7203-line 3g, we reported the net number from K1 lines 7 and 8.  that was a postive number for me.  In part III of Form 7203, we removed the entries on line 38 a, b, c and d.  We didn't enter 0, we deleted the entries.  While this does not exactly match the CPA provided 7203, the stock basis on Line 15 does match and when you study the form we get to the same place.  I hope this helps you.

[applefam5]

Thanks Letsgo8, for "taking one for the team"!

I had actually figured out that "work around" on my own but wasn't ready to commit quite yet.

I spoke with a rep from our accounting firm this morning;  officially, they stand behind the accuracy of form 7203 as provided.  Unofficially, after I explained the situation, he agreed that the work around is "ok" given that the end result is the same.  

IMO, based on my research, there is no doubt that there is a logic problem in TT's 7203 form!

I'm going to bite the bullet and e-file tomorrow with the work around - but I will be looking much harder at TT alternatives for next years go-around.

Thanks All.

[GmWells]

Thanks, but that didn't work for me.  What is the phone number for the TT Expert you called?  I can't find it on the web site.

Thanks