This article focuses solely on the entry of the Items Affecting Shareholder Basis which are found on Box 16 of the Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc. See the shareholder instructions here for additional information regarding the requirements for Schedule K-1 (Form 1120-S).
Note that all of the lines from 16B to 16F are reported on Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations. The program will carry all but 16E to Form 7203.
To enter the Items Affecting Shareholder's Basis from a K-1 (Form 1120-S) in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - Select the S corp K-1 to edit, or to enter a new S corp K-1 select New and choose "Form 1120S K-1 (S corporation)".
After entering all of the information required on the K-1 Heading Information screen, you'll arrive at the K-1 1120-S Edit Screen. This screen has two distinct sections entitled Heading Information and Income, Deductions, Credits, and Other Items.
Items Affecting Shareholder Basis
Line 16A - Tax-Exempt Interest Income - This amount represents the taxpayer's share of tax-exempt interest. This amount will automatically pull to Form 1040, line 2a.
Line 16B - Other Tax-Exempt Income - This amount represents the taxpayer's tax-exempt income other than interest. This amount increases the taxpayer's basis in the corporation and carries to Form 7203. (The corporation should provide the taxpayer with a statement describing the nature of the income and the reason for treating it as tax exempt.)
Line 16C - Non Deductible Expenses - This amount represents the taxpayer's nondeductible expenses incurred by the corporation. This amount decreases the taxpayer's basis in the corporation and carries to Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations.
Line 16D - Property Distributions - This amount represents the property that was distributed to the taxpayer by the corporation and decreases the taxpayer's stock basis in the corporation. The amount entered carries to Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations. If the amount distributed exceeds the taxpayer's stock basis, the excess is treated as a capital gain from the sale or exchange of property and is reported on Form 8949 and Schedule D (Form 1040).
Line 16E - Repayment of Loan by Shareholders - This amount represents the repayment of a loan by the shareholder. If these payments are made on a loan with a reduced basis, the repayments must be allocated in part to a return of the basis in the loan and in part to the receipt of income. The amount entered here needs to be reported in Form 7203 Part II.
Line 16F - Foreign Taxes Paid or Accrued - This amount represents foreign taxes paid or accrued. Foreign taxes paid or accrued reduce the shareholder's basis and cannot exceed basis. The amount entered will carry to Form 7203 Part III.
Note: This is a guide on entering the Items Affecting Shareholder Basis from Schedule K-1 (Form 1120-S) into TaxSlayer Pro. This is not intended as tax advice.
Additional Information:
IRS: Shareholder’s Instructions for Schedule K-1 (Form 1120-S)
Schedule K-1 (Form 1120-S) - Overview
Schedule K-1 (Form 1120-S) - Heading Information
Schedule K-1 (Form 1120-S) - Income (Loss) Items
Schedule K-1 (Form 1120-S) - Deductions
Schedule K-1 (Form 1120-S) - Credits & Foreign Transactions Items
Schedule K-1 (Form 1120-S) - Alternative Minimum Tax (AMT) Items