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?

[Letsgo8]

GmWells-Sorry to read your message.  I connected with the TT support team by:

running error check

an option that presented itself on the screen was to speak with a live TT tax expert

so I clicked on that option

it took me out to Intuit website to pay the $50

then sent me a message that a person would call me within a few minutes and they did.

Hope this helps!

[GmWells]

Thanks, Letsgo8.  I did manage to spend about 3 hours speaking with various TT help desk people and finally got through a "Tier 2 supervisor" who tried various things to help me.  Unfortunately, she could not find a work-around.  I walked her through, via screen-share, all of the steps I took to input my K1 data and showed her that my K1 and Form 7203 I received from our accounting firm are EXACTLY the same as the forms in TT , but TT keeps telling me that I can't have a positive number in blocks 3a and 3g in Part I on the 7203--even though these are SUPPOSED to be positive numbers, leaving "loss and deduction items" for Part III.  After over 2 hours with her, she said she was going to submit a request to the TT development team to research it further.  She advised me to file for an extension, since this could take some time (which I already did).

Perhaps my problem stems from the fact that I am using the Windows desktop download version of TT and not the on-line version like it sounds you are using.  (Shouldn't be an issue.)

I have used TT since 2004 and have never experienced anything like this.  Pretty frustrating.

[AliciaP1]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

Go to the black panel on the top of your screen and select Online. 

1. Scroll down to and select Send tax file to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click send through this screen and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@GmWells 

[GmWells]

Thanks.  I followed your instructions and my token number is:  1130012.

[AliciaP1]

Upon review, you have a 0 entered in the loss section for Ordinary Loss which is causing the error for that line.

Your Capital Gain/Loss issue is because the instructions state to add lines 7, 8a, 8b, and 8c from your K-1 and then enter the net result either on line g if it is a net gain or line 38 if it is a net loss.  If there are no other numbers on those lines of your K-1 than the two you have listed on your 7203, you have a net loss of  $2,166 that needs entered on line 38 to clear the other error.

@GmWells 

[GmWells]

Thanks, those adjustments cleared it up so that TT will allow me to file. 

Just one clarification:  The 7203 in TT does not exactly match the 7203 I received from my company's accounting firm that provided our K1's, K3's, and Form 7203's, in that the stock basis gains and loss calculations are different for lines 4 through 11 and 14.  However, for lines 13 and 15, the values match in TT and my original 7203.  My assumption is that this is OK, since line 13, which reflects the stock divestiture I received in 2022 is correct (and, hence, is the cost basis for that divestiture for which I received a 1099-B).  Also, since line 15 matches my original 7203, I assume that this is OK, since this line provides the Stock basis at the end of the corporation's tax year.  I assume that this number is something the IRS will want to match with next year's Form 7203, line 1---correct?  If my assumptions are correct, then I should be safe to file and avoid any issues with the IRS this year or next year--correct?

Sorry for the additional questions--just want to understand--THANKS!!

[Svetlapas]

Hello! 

I'm a little bit confused with the section II of the form 7203. IRS says: You must complete this section if you have personally loaned money to the corporation.  If I personally did not lend money to the corporation, but the corporation borrowed from an external bank, then I do not need to fill out section 2 and specify the loan, is that correct? Thank you! 

[JamesG1]

If  

• you did not personally loan money to the corporation, and/or  
• you did not guarantee or co-sign a loan made to the corporation and personally make a loan payment on that loan,

then you do not have to complete Part II Shareholder Debt Basis of IRS form 7203.

IRS Instructions for Form 7203, page 3, states:

Part II.  Shareholder Debt Basis

You must complete this section if you have personally loaned money to the corporation.

and also this

Loans that a shareholder guarantees or co-signs are not part of a shareholder’s loan basis except to the extent the shareholder makes a payment on the loan guaranteed or co-signed.

[uckoff]

no you cannot have a gain and loss in the same year, but this part 3 also shows carry over losses from the previous year which then the allowable amount get put on as a loss and can actually 0 out your gain.

this is what I currently have and it wants to tell me there is an error in which there is not and it is exactly how my K1 statement for this line item is printed out.

[uckoff]

i dont have any losses in column a but mine are from a carry over and it still show an error but you can have a carry-over loss and a gain in the current year but the program won't register it as correct. it's a programing issue with whoever made this program

[uckoff]

it is a very bad bug that is still not fixed, i will not be using turbo tax for my business nor personal taxes after this mess

[kirstymaciver]

I left part 2 blank as it does not apply to my situation. However, TurboTax is auto entering information in that section (all zeros) and requiring me to select whether this is a formal note or an open account. It is neither as it doesn't apply, but TurboTax won't let me proceed with my filing until I have selected one of these options. I have tried going back into the form and deleting all the zeros that will Auto entered by TurboTax, but they just repopulate again. I'm not quite sure if it matters which checkbox I check saying that the numbers are all zeros. Is there a work around for this?

[JamesG1]

In Part II of IRS form 7203, if you have no formal notes representing loans made to your S corporation, select Open account.

IRS Instructions for Form 7203, page 3, states:

Loans made to the S corporation that are not evidenced by a written instrument are referred to as an open account debt and are not separately tracked.

In TurboTax Premium Online, I have not seen what you are experiencing.  Delete the zeros if you are allowed to.  Make sure that you Refresh Calculations.

@kirstymaciver 

[thepbjpresent]

I've been struggling with this same issue, and I think I've found out what's going on here. IRS doesn't have great guidance on form 7203, and nothing relating to Part I line 3g, but Tax Slayer does: https://support.taxslayerpro.com/hc/en-us/articles/[phone number removed]6-IRS-Form-7203-Form-lines-...

3g Net Capital Gains:
Sch K-1 Boxes 7, 8a, 8b, and 8c (if a net positive amount).
If negative it goes on Line 38(a). T

This is the same guidance the Turbo Tax gives.

Our accountant listed NET CAPITAL GAINS (form 7203 Part 1, line 3g) as same number as Net Long Term Capital Gains (K-1, line 8a), but according to Tax Slayer (and Turbo Tax) this is supposed to be a NET Calculation of:

Net SHORT Term Capital Gain (loss) (K-1, line 7)
+ Net LONG Term Capital Gain (loss) (K-1, line 8a)
+ Collectibles (28%) gain (loss) (K-1, line 8b)
+ Unrecaptured sec 1250 gain (K-1, line 8c)

and the K-1 Part III, line 38 is NET CAPITAL LOSS (i.e. same calculation as above, if negative)

Our Accountant was entering our Net Short Term Capital Gain (Loss) on K-1 Part III, line 38

Now looking it over, it DOES seem that Turbo Tax's and Tax Slayer's claim that this is a NET calculation of K-1 lines 7, 8a, 8b, 8c checks out... in which case it's true there couldn't be both a NET CAPITAL GAIN and a NET CAPITAL LOSS.

It's worth noting this this method of calculation (vs our accountant's) does not change the Stock basis at the end of the corporation's tax year (form 7203, Part 1, Line 15), it just balances out another way (but in a way that Turbo Tax will allow me to proceed and complete my 1040 filing!)