Question

question about shareholder stock basis for S Corp ( I am the only owner of the S Corp)

Forum|Forum|2 years ago
February 23, 2024
1 reply
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Last year, the ordinary business income for my S Corp was $50000 which was passed through to my personal income in K-1. Why does $50000 appear as shareholder stock basis for this year in TurboTax Business? I thought the shareholder stock basis should be 0 for this year since the income of the S Corp for last year has been passed to myself.

TurboTax Business Windows

M

Mike9241

your basis is any capital you contributed + any undistributed income. income is not distributed because it is reported on reported on your return. it only is distributed when the S-Corp makes a distribution of cash or property to you.

look at the S-corp's schedule L at the beginning of the year. What's the total line 19 plus the total for lines 22 through 26. that's likely your tax basis at the beginning of the year. Any distributions in 2022 reducing your basis would appear on the k-1 line 16 and would also show in the M-2 column a line 7

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NihaoAuthor

I guess I made a small mistake not declaring the distribution of $50000 on line 16 of K-1 last year. But I guess this is not a fatal error since tax has been paid on personal level, right?

how to remedy it for this year? Can I just manually change the shareholder beginning base from $50000 to $0 for this year? I am the only shareholder of the S corp.

Rick19744

A couple of comments:

Based on your facts, that means your prior year form 7203 is incorrect.
Adjusting the beginning of the year to what it should be could lead to an IRS notice because prior year ending does not match current year beginning.
Hopefully if you adjust prior year form 7203 line 6 for the $50,000 you still have basis?
Additionally, what was reflected on the prior year Sch M-2 column (a) line 7? Did this reflect your distribution?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.