1120S K-1, Line H Regarding Shares?

Forum|Forum|1 year ago
January 30, 2025
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I am a 100% owner of a S-Corp for a number of years now. I pay myself a reasonable wage and pay the remainder of the profits as a 16D distribution.

I noticed that Line H I have never entered any share information. My Articles of Incorporation do state 10k shares. Do I need to be entering 10k beginning and ending of each year?

I'm asking because if I enter 10k shares on line H then TT wants to insert a form 7203 within my 1040. I've never submitted this before. Is the IRS going to raise eyebrows now seeing this for the first time?

This is an IT services company so there isn't much value in the company. Do I need to go back all these years and calculate the basis?

Are the shares reporting on the 1120s K-1 required to be reported? Thank you.

TurboTax Business Windows

PatriciaV

Employee

It depends. You may need to include Form 7203 with your S-Corp return if you have:

Claimed a deduction for your 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), or
Received a loan repayment from an S corporation.

Form 7203 records stock share basis. You may wish to complete and retain Form 7203 even for years it is not required to be filed, as this will ensure your basis is consistently maintained year after year.

You don't need to file Form 7203 for prior years, as the form reports historical activity to date.

Read more from the IRS here: S Corporation Stock and Debt Basis

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mgc6288Author

This is just a pass through S Corp. My Articles of Incorporation state 10k shares which has never changed and I suspect will never change. I'm not sure they hold any value either, or if they do, who would want to pay for them.

With that knowledge, am I supposed to list the 10k of shares beginning and end of year on the K-1 each year?

By adding the shares info on the K-1 into TT I am confronted with the 7203 and am wondering if this is overkill as, again, do I need to be reporting the 10k shares on the K-1 to begin with?

PatriciaV

Employee

Yes, report your original shares as the beginning share balance. If nothing changed, the ending share balance would be the same. The share value is equal to your original investment in the S-Corp. The Articles of Incorporation should specify a share value (typically one dollar). The ending value is adjusted for additional investment, distributions, and loans. You may need previous year K-1s to calculate the final share value.

See the IRS Instructions for Form 7203 for more help.

You are not required to include Form 7203 if none of the transactions listed above occurred during the year. If TurboTax is asking you to complete a 7203, you probably reported one of those items.

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