Knowledge Base

16511: 1040 - Distributions in Excess of Basis from 1120S

1040 Individual Generally

Does Drake Tax automatically calculate the gain that results from a distribution in excess of basis from a s-corp K1 reported on the 1040 return? 


A distribution reported in box 16, code D flows to the Adjusted Basis worksheet, line 5. If a distribution exceeds the basis that the taxpayer has in the s-corporation, the difference will be carried to Form 8949, Part II. Box F is checked and the description shows as "Excess Distribution" with the name and EIN of the s-corp listed: 

Review Wks K1S Detail Adj Basis in view mode for details.

Note: Distributions in excess of stock basis are treated as capital gains regardless of whether or not the taxpayer has debt basis.

This calculation is done automatically starting in Drake18. In prior years, the gain is not automatically computed (see note 216). Manual entries on screen D and the basis worksheet screen are required.

See the IRS' page S Corporation Stock and Debt Basis for more information about basis and distributions. 

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