To start, since you're treating it as a loan, you have no stock basis. In 2023 if your K-1 reported a profit that goes to stock basis. A loss goes to loan basis. If 2024 was a profit first, any reduced basis due to a 2023 loss is restored limited to the smaller of the profit or the reduced basis. In other words, the basis of a loan can never exceed its original principal amount
What did the 2023 Form 7203 show? That affects what took place in 2024 and even how to report things. You could even have income from the long repayment.
for Part II of the 7203 line 16 would be the $28. this is your loan balance
line 19 would be $3K your principal repayment.
line 21 comes from Form 7203, line 31 for 2023. if there was a loss in 2023 the $28K would go down by the net loss, not below zero, as shown on your K-1. if there was a profit the basis would still be $28K
if you had a net loss combining 2023 and 2024, then you'll have income on repayment as computed in Section C. .
There is also a potential tax issue if you're not being paid interest on that loan
Section 7872 Treatment of loans with below-market interest rates applies per IRC Sec. 7872(a)(1)(c)(1)(C)
and the fact that the loan is above the exemption amount of $10K as specified in 7872(a)(1)(c)(3)
