Basis Computation note Sch E, top of Page Two

[JinxyCat86]

How are you handling the new basis requirement found at the top of Sch E Page Two? As an FYI, I was unable to locate this same verbiage in the 2018 Sch E instructions...is this limited to ProSeries?

“If you report a loss, receive a distribution, dispose of stock, or receive a loan repayment from an S-Corp, you must check the box in column (e) on line 28 and attach the required basis computation. If you report a loss from an at-risk activity for which any amount is not at risk, you must check the box in column (f) on line 28 and attach form 6198.”

[PhoebeRoberts]

FWIW, this is not exactly a new requirement. From the 2017 forms instructions: "If you are claiming a deduction for your share of an aggregate loss, attach to your return a computation of the adjusted basis of your corporate stock and of any debt the corporation owes you."

[JinxyCat86]

Thanks Phoebe - I agree to some extent, however, the 2018 note on from Sch E covers much more...including anyone who has taken distributions...which is basically everyone with 1065/1120S activity.

[PhoebeRoberts]

Agree completely. Lacerte started putting in a diagnostic when the instructions first required a basis schedule, and has produced a basis schedule since before that. I'm surprised PS hasn't done anything.

[JinxyCat86]

Interesting. So in other words, you DO attach the schedule for anyone with 1065/1120S activity?

[PhoebeRoberts]

I prepare it for everyone. It's not clear to me whether Lacerte attaches it to the e-file for everyone, or just ones where it's required.

[rbynaker · Accepted solution]

I haven't yet found out the source for this change. But at the IRS National Tax Forum the presenter (an IRS attorney) was harping on it pretty heavily. I think it's not always mandatory, just if there are any losses or distributions (so just very nearly almost always mandatory?) What he said is that they want to see that we're getting the ordering right for applying losses, distributions, NDE, etc. Commentary, etc. may have been slightly different in my live seminar vs. the one transcripted/recorded but if you're curious, here's the transcript:

https://irstaxforumsonline.com/sites...transcript.pdf

Jump to the middle of page 4 (or just search for the word "attach") and read from there.

And/or you can "audit" the seminar video here:

https://irstaxforumsonline.com/node/12854/auditview

Over the summer I tinkered with my S Corp basis spreadsheet but never quite got it into a format that I liked so it's still in my "to do" pile (along with copies of the TTB worksheet and worksheets from various other sources (IRS/Drake/ProSeries) that end up being slightly different in their presentation.) I was trying to facilitate the election of NDE ordering, AMT basis, state basis (which may be different due to bonus depreciation), etc. Ended up with too many complications that only apply in certain circumstances. I don't have a lot of S Corps so I may just abandon the attempt to create a standardized template for this and just have a unique spreadsheet for each entity with lines that are appropriate for each year.

Rick

[JinxyCat86]

Thanks Rick. I agree its a bit of a grey area and one that places a tremendous burden on tax preparers in a year rife with change.

[sjrcpa]

You had to know their basis anyway to know if they could claim the loss and/or if distributions were in excess of basis.

[PhoebeRoberts]

Yeah, this is not the year I'd have picked for, "and by the way, you'd better know your basis." Back before we started diligently tracking basis, it wouldn't be unusual to have a workpaper note that said, "there's plenty of basis" but no exact number. Heck, even diligently tracking basis, I had one already this year where I knew AMT basis had gotten screwed up along the way, and I had to go back to the beginning of time to conclude that AMT basis should have matched regular tax basis for the last couple years.