S Corp - K-1 And Form 7203

[ashajain1]

When K-1 from S Corp has a loss, and shareholder has no stock or debt basis,  Form 7203 is calculating correctly, but Form 1040 is deducting the loss against ordinary income, when loss allowed should be $0, and it should be carried forward

[sjrcpa]

Yes that is a limitation/drawback/failure of ProSeries

[TaxGuyBill]

Yep, ProSeries is not set up to limit due to Basis.  You need to manually do it by only entering the allowable loss (if any) and then manually make a note to yourself to carry it forward on next year's return.

[sjrcpa]

@TaxGuyBill 

I'm curious. If they do that, will the 7203 be correct? I don't know if the 7203 and K-1 input are linked in ProSeries.

[TaxGuyBill]

@sjrcpa 

Excellent question.  If you just leave it alone, no, the 7203 will be wrong (the K-1 amounts automatically flow to the 7203).  We also need to manually change the 7203 (they are fully editable fields, so no overrides are needed).  It will also need to be manually changed when we enter the allowable losses in the future year.

I need to start mentioning that when I tell people about the manual adjustments due to Basis limits.  Thanks.