In the information below, use of the word entry in bold means the preparer must enter the amount that goes on this line if it's not pulled from the prior year's form.
Cells shaded in gray indicate an amount that is either (a) calculated from other information in the form or (b) pulled from elsewhere in the form or from Schedule K-1.
Part I – Shareholder Stock Basis | ||
Line | Description | Source |
1 | Stock basis at the beginning of the corporation's tax year | This amount is an entry on a new return, and adjustable when pulled from the prior year. |
2 | Basis from any capital contributions made or additional stock acquired during the tax year | This amount is an entry. Prior to 2022, it is an entry in the Shareholder Basis Worksheet (menu item 2) in the shareholder's K-1. |
3a | Ordinary business income | Sch K-1 Box 1 (if a positive amount). If negative it goes on Line 35(a). |
3b | Net rental income | Sch K-1 Box 2 (if a positive amount). If negative it goes on Line 36(a). |
3c | Other net rental income | Sch K-1 Box 3 (if a positive amount). If negative it goes on Line 37(a). |
3d | Interest income | Sch K-1 Box 4. |
3e | Ordinary Dividends | Sch K-1 Box 5a. |
3f | Royalties | Sch K-1 Box 6. |
3g | Net Capital Gains | Sch K-1 Boxes 7, 8a, 8b, and 8c (if a net positive amount). If negative it goes on Line 38(a). |
3h | Net section 1231 gain | Sch K-1 Box 9 (if a positive amount). If negative it goes on Line 39(a). |
3i | Other income | Sch K-1 Box 10 (if a net positive amount). This field allows for adjustment. If negative it goes on Line 40(a). |
3j | Excess depletion adjustment | Sch K-1 Box 15, Code C. |
3k | Tax-exempt income | Sch K-1 Box 16, Codes A and B. |
3l | Recapture of business credits | Sch K-1 Box 17 with a recapture code, but this is an entry field and not pulled from the return or K-1. The information on the K-1 in Box 17 is used by the individual shareholder to determine if they have credit recapture on their individual return. Any amount entered here will be determined by the treatment this was given on the previous year’s individual return. |
3m | Other items that increase stock basis | This is an entry field and not pulled from the return or K-1. |
4 | Add line 3a through 3m | Sum of lines 3a through 3m. |
5 | Stock basis before distributions | Sum of lines 1, 2, and 4. |
6 | Distributions (excluding dividend distributions) | Sch K-1 Box 16, Code D. |
7 | Stock basis after distributions | Subtract Line 6 from 5 (if $0 or less, skip lines 8 through 14 and enter $0 on Line 15). |
8a | Nondeductible expenses | Sch K-1 Box 16, Code C. |
8b | Depletion for oil and gas | This is an entry field and not pulled from the return or K-1. This entry is caused by something that would have occurred on the shareholder’s prior year individual return. |
8c | Business credits (sections 50(c)(1) and (5)) |
This is an entry field and not pulled from the return or K-1. |
9 | Add Lines 8a, 8b, and 8c | Sum of Lines 8a, 8b, and 8c. |
10 | Stock basis before loss and deduction items | Subtract Line 9 from Line 7. If this is $0 or less enter $0, skip lines 11 through 14, and enter $0 on Line 15. |
11 | Allowable Loss and deduction items | This is the amount calculated on Line 47(c). |
12 | Debt basis restoration | This amount will be calculated and come from Line 23 of this form. |
13 | Other Items that decrease stock basis | This is an entry field and not pulled from the return or K-1. Some, not all, of the items reported on Sch K-1 Box 17 Code AD go here. |
14 | Add Lines 11, 12, and 13 | Sum of Lines 11, 12, and 13. |
15 | Stock basis at end of the year | Line 10 minus line 14 but not less than $0 |
Part II – Shareholder Debt Basis | |||||
Line | Description | Debt 1 | Debt 2 | Debt 3 | Total |
☐ Formal Note ☐ Open Account |
☐ Formal Note ☐ Open Account |
☐ Formal Note ☐ Open Account |
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Section A - Amount of Debt | |||||
16 | Loan Balance at the beginning of the corporation's tax year | This is an entry field in a new return. In sub-sequent years it is pulled from the amount in Line 20 for this debt. | This is an entry field in a new return. In sub-sequent years it is pulled from the amount in Line 20 for this debt. | This is an entry field in a new return. In sub-sequent years it is pulled from the amount in Line 20 for this debt. | Total across the columns. |
17 | Additional Loans | This is an entry field. | This is an entry field. | This is an entry field. | Total across the columns |
18 | Loan balance before repayment | Line 16 plus Line 17 | Line 16 plus line 17 | Line 16 plus line 17 | Total across the columns. |
19 | Principal portion of debt repayment | This is an entry field. | This is an entry field. | This is an entry field. | Total across the columns. This amount should equal Box 16, Code E. |
20 | Loan Balance at the end of the corp's tax year | Line 18 minus Line 19 | Line 18 minus Line 19 | Line 18 minus Line 19 | Total across the columns |
Section B - Adjustments to Debt Basis | |||||
21 | Debt Basis at the beginning of the corp's tax year | This is an entry field. | This is an entry field. | This is an entry field. | Total across the columns. |
22 | Line 17 amount | Amount from Line 17 for this debt. | Amount from Line 17 for this debt. | Amount from Line 17 for this debt. | Total across the columns. |
23 | Debt basis restoration | The amount of debt basis restoration loss in Line 47(d) that is pro-rated for this debt. | If the amount in Line 21 for this debt is greater than Line 16, no entry is made. If Line 21 is less than Line 16, this is a calculated amount. The calculation is Line 4 minus Lines 6, 9, 13, 47(a) and 47(b). |
If Line 21 is greater than Line 16, no entry is made. If Line 21 is less than Line 16, this is a calculated amount. The calculation is Line 4 minus Lines 6, 9, 13, 47(a) and 47(b). |
If the amount in the total column for Line 21 is greater than the amount in the total column for Line 16, no entry is made. If Line 21 is less than Line 16, this is a calculated amount. The calculation is Line 4 minus Lines 6, 9, 13, 47(a) and 47(b). |
24 | Combine Lines 21, 22, and 23 | Calculated | Calculated | Calculated | Total across the columns. |
25 | Divide line 24 by line 18 | Calculated | Calculated | Calculated | |
26 | Nontaxable debt repayment | Multiply line 25 by line 19. | Multiply line 25 by line 19. | Multiply line 25 by line 19. | Total across the columns. |
27 | Debt Basis before nondeductible expenses and losses | Subtract Line 26 from Line 24. | Subtract Line 26 from Line 24. | Subtract Line 26 from Line 24. | Total across the columns. |
28 | Nondeductible expenses and oil and gas deductions in excess of stock basis | This is the smaller of Line 27 or Line 9 minus Line 7. | This is the smaller of Line 27 or Line 9 minus Line 7. | This is the smaller of Line 27 or Line 9 minus Line 7. | Total across the columns. |
29 | Debt basis before losses and deductions | Subtract Line 28 from 27. If less than $0, enter $0. | Subtract Line 28 from 27. If less than $0, enter $0. | Subtract Line 28 from 27. If less than $0, enter $0. | Total across the columns. This number is important for Part III. |
30 | Allowable Losses (any allowable loss from Line 47(d) would be pro-rated against the debt basis in Line 29 for each debt) | The amount of allowable loss in Line 47(d) that is pro-rated for this debt. | The amount of allowable loss in Line 47(d) that is pro-rated for this debt. | The amount of allowable loss in Line 47(d) that is pro-rated for this debt. | Amount from Line 47(d). |
31 | Debt basis at corp's tax year end | Subtract Line 30 from Line 29. | Subtract Line 30 from Line 29. | Subtract Line 30 from Line 29. | Total across the columns |
Section C - Gain on Loan Repayment | |||||
32 | Repayment | Amount from Line 19 for this Debt. | Amount from Line 19 for this Debt. | Amount from Line 19 for this Debt. | Total across the columns. |
33 | Nontaxable repayments | Amount from Line 26 for this Debt. | Amount from Line 26 for this Debt. | Amount from Line 26 for this Debt. | Total across the columns. |
34 | Reportable gain | Subtract Line 33 from Line 32.* | Subtract Line 33 from Line 32.* | Subtract Line 33 from Line 32.* | Total across the columns.* |
* - The total reportable gain on Line 34 is not reported on Form 1120-S. It is the individual shareholder’s responsibility to report any gain on their individual tax return. How the gain for a particular debt is reported depends on whether the debt is evidenced by a formal note or is an open account.
- Formal note (capital gain) - Report on Form 8949 and Schedule D.
- Open account (ordinary gain) - Report on Form 4797.
Part III stipulations
Column (c)
- If Line 10 is $0, column (c) is not completed.
- If Line 10 is greater than Lines 47(a) + 47(b), the amounts entered in column (c) equal sum of the amounts in columns (a) and (b) on the same line .
- If Line 10 is greater than $0 but less than the total of Lines 47(a) + 47(b), the Line 10 amount represents the allowable loss and it is pro-rated in column (c) with any loss amounts found on Lines 35 through 46 in columns (a) and (b).
Column (d)
- If the Line 29 Total is $0, this column is skipped.
- If Line 10 is greater than Line 47(c), this column is skipped. (In other words, stock basis is more than the total allowable loss from stock basis, so stock basis is still greater than $0.)
- If the Line 29 Total is greater than Lines 47(a) + 47(b) – 47(c), column (d) equals the sum of column (a) + (b) – (c) on the same line. (At this point, stock basis is $0 but debt basis is greater than the remaining allowable loss, so the full loss is allowed.)
- If the Line 29 Total is greater than $0 but less than Lines 47(a) + 47(b) – 47(c), the Line 29 Total represents the remaining allowable loss and it is pro-rated in column (d) with any loss amounts found on Lines 35 through 46 in columns (a) and (b). (If there is a carryover, both stock basis and debt basis are $0.)
Part III – Shareholder Allowable Loss and Deduction Items | ||||||
Line | Description | (a) Current year losses and deductions | (b) Carryover amounts from the previous year | (c) Allowable loss from stock basis | (d) Allowable loss from debt basis | (e) Carryover amount to the next year |
35 | Ordinary business loss | Sch K-1 Box 1 (if a negative amount). | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
36 | Net rental real estate loss | Sch K-1 Box 2 (if a negative amount). | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
37 | Other net rental loss | Sch K-1 Box 3 (if a negative amount). | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
38 | Net capital loss | Sch K-1 Boxes 7, 8a, 8b and 8c (if a net negative amount). | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
39 | Net section 1231 loss | Sch K-1 Box 9 (if a negative amount). | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
40 | Other loss | Sch K-1 Box 10 (if a net negative amount. This amount can be adjusted. |
Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
41 | Section 179 deductions | Sch K-1 Box 11. This amount can be adjusted. | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
42 | Charitable contributions | Sch K-1 Box 12, Codes A through G. | Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
43 | Investment interest expense | Sch K-1 Box 12, Code H. This amount can be adjusted. |
Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
44 | Section 59(e)(2) expenditures | Sch K-1 Box 12, Code J. This amount can be adjusted. |
Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
45 | Other deductions | Sch K-1 Box 12, Codes I, L, M, O, and S. This amount can be adjusted. |
Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
46 | Foreign taxes paid or accrued | Sch K-1 Box 16, Code F. This amount can be adjusted. |
Entry field in a new return, otherwise it will pull from the prior year column (e). | As calculated above | As calculated above | Amounts in column (a) plus (b) less the amounts in column (c) and (d). |
47 | Total loss | Sum of column (a) Lines 35 through 46. | Sum of column (b) Lines 35 through 46. | Sum of column (c) Lines 35 through 46. This total will carry to Line 11. |
Sum of column (d) Lines 35 through 46. This total will carry to Line 30. |
Amounts in column (a) plus (b) less the amounts in column (c) and (d). |