My apologies if this is posted twice. I sent a question last night but I don't see it posted nor did I receive an email confirming my question was received.

My client received an 1120-S K-1 that actually has the basis statement attached. It shows $41K distributions in excess of basis, $0 basis, $4K debt basis and $33K loss carryover.

I am guessing that I should trust the $41K distributions in excess of basis is the number after considering debt basis. However, I would think if debt basis were considered then debt basis would be zero.

I know the $33K loss carryover needs to reduce the operating loss to zero on the 1040 K-1 wks. Also, the $41K distributions in excess of basis also needs to be reported as LTCG on Sch D.

However, does the $41K get reduced by the $33K loss not able to be deducted and only $8K LTCG is reported? It seems as though the client is getting hit twice for the same issue if I don't allow the loss AND report $41K LTCG for distributions in excess of basis.

Thanks for your help.