Form 7203 is used by shareholders of an S corporation to determine if there are any limitations on their share of the S corporation's deductions, credits, and other items.
If a client has received Schedule K-1 from an S corporation, ask them if they also received a copy of Form 7203. While it's not the responsibility of the preparer who issued the Schedule K-1 to prepare Form 7203 for the taxpayer, they may have done so.
When preparing the tax return for a client that received Schedule K-1 from an S corporation, you should include Form 7203 with their individual tax return if any of the following are true:
- They are claiming a deduction for a loss for a loss on Schedule K-1 (Form 1120-S).
- They disposed of stock in the S corporation.
- They received a non-dividend distribution from the S Corporation.
- They received a loan repayment from the S Corporation.
When completed, Form 7203 will show you whether the taxpayer has sufficient basis to claim any of the loss, deduction, or credit items on the Schedule K-1.
Completing Form 7203 in TaxSlayer Pro
In TaxSlayer Pro, Form 7203 is accessed in the course of entering Schedule K-1 from an S corporation, so the first step is to enter the S corporation Schedule K-1.
To complete or edit Form 7203 in TaxSlayer Pro, from Main Menu of the tax return (1040) select:
- Income
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - Select and open the 1120-S Schedule K-1.
- L. Shareholder Stock and Debt Basis (7203) - Select to open the form. Complete each section as needed.
Additional Information:
IRS Form 7203 - Form lines and explanations