Preparing New IRS Form 7203: S Corp Shareholder Stock Basis, Debt Basis & More

Form 7203 is the new reporting form required by the IRS to show a shareholder basis in an S-corporation. This new form must be filed on the personal tax return (Form 1040) of most shareholders, starting with 2021 returns. 

Form 7203 and its independent instructions are designed to replace the three-part Worksheet for Figuring a Shareholder's Stock and Debt Basis and its related instructions that were formerly included in the Shareholder's Instructions for Schedule K-1 (Form 1120-S).

While the S corporation's basis calculations remain intact, the new form demands additional information to substantiate and justify the basis computations. As the form deals with S company stock and debt basis, some observers are under the impression that it is filed with the 1120S business return. 

Nonetheless, the form will be included in a shareholder's income tax return if any of the following are true of the S corporation:

• The shareholder sells his/her shares of stock during the tax year.
• The shareholder receives a payout from the S corporation.
• The shareholder receives a loan payback from the S corporation during the tax year.
• The shareholder claims a loss-related deduction.

S corporation shareholders use Form 7203 to figure out the potential limitations of their share of the S corporation’s deductions, credits, and other items that can be deducted from their individual returns. Beginning with the 2021 tax year, Form 7203 replaced the worksheet. The draft Form 7203 for the tax year 2022 also had some changes.

Join this Tax webinar by “Jason Dinesen” to discuss what the basis is, how to calculate it, and how to use Form 7203.

• What is Basis?
• Analyze how the S-corporation basis differs from the partnership basis.
• Identify whose responsibility, it is to track basis - it`s not the entity`s responsibility.
• Analyze the steps in calculating the basis of an S-corporation.
• Differentiate types of loans from shareholders and those loans affect the basis.
• Review when the 7203 Form must be filed.
• Discuss options for reconstructing the basis, if prior information doesn`t exist or is unreliable. 

• CPAs
• Tax Practitioners
• Tax Preparers Managers
• Bookkeepers & Accountants
• Tax Consultants
• Tax Professionals who want to understand everything about the new Form 7203.