S Corp Basis, Distributions, and Form 7203: Calculating Stock and Debt Basis, Losses, Loan Repayments

Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations, formalized the requirement for shareholders to include a basis schedule for specific situations with their tax returns. Whether or not the form must be filed depends on certain criteria as provided in the form instructions. Tax professionals must understand all items required under Form 7203 and key issues in tracking and calculating basis to avoid reconstructing basis in the future.

When a shareholder receives a K-1 reflecting a loss or a distribution, or if there is a change in ownership, the shareholder must determine their adjusted basis to determine the tax effects. Shareholders bear the burden of basis tracking with any missteps potentially resulting in adverse tax consequences.

The form includes three sections: Part I Shareholder Stock Basis, Part II Shareholder Debt Basis, and Part III Shareholder Allowable Loss and Deduction Items. Tax advisers must understand how to report shareholders' basis, the pertinent regulations governing these calculations, and potential conflicts between the form instructions and these regulations.

Listen as our panel discusses methods for the reconstruction of beginning basis and best practices for tracking shareholders' basis. The panel will also discuss challenges for reporting loan repayments, stock blocks, and utilization of suspended losses.

1. S Corp basis and filing requirements
2. Form 7203
   1. Part I – Stock Basis
   2. Part II – Debt Basis
   3. Part III - Shareholder Allowable Loss and Deduction Items
3. Calculations and examples
4. Reconstructing basis
5. Best practices and pitfalls to avoid

The panel will cover these and other key issues:

• What are the key challenges in calculating stock and debt basis?
• Navigating Form 7203 and pitfalls to avoid
• Treatment of loan repayments as ordinary vs. capital income
• Reporting the utilization of prior year losses on Form 7203
• Using stock blocks to minimize shareholders' tax

Learning Objectives

After completing this course, you will be able to:

• Identify differences between formal and open account notes
• Determine when a loan repayment could be treated as capital gain rather than ordinary income
• Decide best practices for reconstructing prior years’ basis
• Ascertain when shareholders are required to complete and include Form 7203 with their returns

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).