On Aug. 25, 2021, NATP published a blog called S corporation basis -IRS requests comments. The blog discussed a new form, Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations. The draft Form 7203 was posted by the IRS on Oct. 21, 2022, and will be used to report S corporation shareholder stock basis, debt basis and allowed/disallowed losses on Form 1040. The draft instructions for Form 7203 were posted by the IRS on Oct. 26, 2021.
According to the draft form instructions, the new Form 7203, and its separate instructions, are developed to replace the three-part worksheet for figuring a shareholder’s stock and debt basis (and its related instructions) formerly found in the shareholder’s instructions for Schedule K-1 (Form 1120-S).
Form 7203 is filed by S corporation shareholders who:
- Are claiming a deduction for their share of an aggregate loss from an S corporation (including an aggregate loss not allowed last year because of basis limitations)
- Received a non-dividend distribution from an S corporation
- Disposed of stock in an S corporation (whether or not gain is recognized)
- Received a loan repayment from an S corporation
Do not file draft forms and do not rely on draft forms, instructions and publications for filing. The IRS does not release draft forms until it believes it has incorporated all changes (except when explicitly stated on this coversheet). However, if unexpected issues occasionally arise, or legislation is passed, the IRS will post a new draft of the form to alert tax preparers and taxpayers that changes were made to the previously posted draft.
A draft Form 7203 is presented below.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.