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Shareholder Basis Schedule

BeccaGolden
Level 1

Hello!  I am new to Proconnect and trying to fill out the S Corp Shareholder Basis Schedule.  My client has a loss in excess of basis.  The program is automatically offsetting the loss in excess of basis against the debt basis but my understanding is that the loss cannot be offset because it's not a loan to the entity from the shareholder.  Is there some box I've missed to make this a disallowed loss to carryforward to future years?  Thank you in advance for your help!

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TaxGuyBill
Level 15

@BeccaGolden wrote:

The program is automatically offsetting the loss in excess of basis against the debt basis but my understanding is that the loss cannot be offset because it's not a loan to the entity from the shareholder.


Maybe I'm not thinking clearly, but why is there Debt Basis if there is not a loan from the shareholder?

BeccaGolden
Level 1

Oh!  Duh.  I am a CPA but this is my first year entering the tax arena (and lets just say it's been a while since I sat for the exams...).  I am helping out a couple existing bookkeeping clients with their taxes and assumed that previously filed tax returns were correct so I was confused when the debt basis included loans NOT from the shareholder to the S Corp.  I guess my questions now are:

 - can I just create a correct Shareholder basis schedule for 2021 tax year or do I need to correct the prior year return as well? 

- The S Corp tax return Shareholder Basis Schedule stated the loss was disallowed for the shareholder but the shareholder's personal tax return claimed the entire loss - shouldn't that have been carried forward rather than claimed in full? 

- The Shareholder had distributions in excess of stock basis but somehow this did not trigger capital gains tax on the Shareholder's personal tax return - is there some trick I'm missing that would prevent the shareholder from having to pay or was it because the debt basis was incorrectly overstated?

Thank you in advance for your assistance - I really appreciate your patience.

Best,

Becca

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TaxGuyBill
Level 15

@BeccaGolden wrote:

 - can I just create a correct Shareholder basis schedule for 2021 tax year or do I need to correct the prior year return as well? 

- The S Corp tax return Shareholder Basis Schedule stated the loss was disallowed for the shareholder but the shareholder's personal tax return claimed the entire loss - shouldn't that have been carried forward rather than claimed in full? 

- The Shareholder had distributions in excess of stock basis but somehow this did not trigger capital gains tax on the Shareholder's personal tax return - is there some trick I'm missing that would prevent the shareholder from having to pay or was it because the debt basis was incorrectly overstated?


 

Do a correct Basis schedule for whichever tax return you are preparing.  If you are not preparing a previous return, I don't see any reason to mess with it.

Yes, if the there was not enough Basis, the loss should not have been allowed and it would be carried forward.  Advise the client to amend.

I'm not sure how ProConnect Online works (I use ProSeries).  *IF* the Basis worksheet controls such things as creating a capital gain due to excess Basis, yes, incorrect Basis on the worksheet would not create the capital gain because the program thinks there is enough Basis.   But after you correct the Basis worksheet, check how the program treats the excess Basis.  In my software (ProSeries), you need to manually enter the excess distributions on 8949/Schedule D (but my software also does not have a Basis worksheet for 1040s).

George4Tacks
Level 15
One quirk you need to learn quickly is that 0 is not a valid entry in this program. If you want a zero, you must enter -1 (negative 1).
STRANGE, BUT TRUE!

ex-AllStar