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17439: Form 7203 - Shareholder Basis - EF Messages 5486 and 5851 (Drake21)


1040 Individual Generally

What is Form 7203? How do I clear EF Messages 5486 and 5851?

 

Starting in tax year 2021, Form 7203 replaces the shareholder's basis worksheet (Worksheet for Figuring a Shareholder’s Stock and Debt Basis) in the 1040 return.

Important: Form 7203 is only generated in a 1040 return, not in an 1120S return. Drake will continue to generate the basis worksheets Wks SBAS in the 1120-S return (if enabled under Setup > Options > Form & Schedule Options) to provide required information to the shareholder, however, the IRS instructions indicate that the basis should be tracked by the shareholder at the individual level: "You are responsible for keeping the information needed to figure the basis of your stock in the corporation. Schedule K-1 (Form 1120-S) provides information to help you figure your stock basis at the end of each corporate tax year."

Form 7203 is used to figure potential limitations of a shareholder's share of the S corporation's deductions, credits, and other items that can be deducted on their individual return. This form must be filed if the shareholder:

  • Is 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), or
  • Received a loan repayment from an S corporation

Information for Form 7203 is entered on the Basis Wkst and Basis Wkst (cont) tabs of the K1S screen. These entries automatically generate Form 7203 in view mode. Entries are required when a loss is being reported a distribution was received, stock was disposed of, or loan repayment was received (see EF messages below). 

For more information, see the Form 7203 Instructions

EF Message 5486:

BASIS WORKSHEET MISSING: A K1S screen contains data but no "Basis Worksheet" screen has been completed. Either a loss is being reported a distribution was received, stock was disposed of, or loan repayment was received. A basis computation is, therefore, REQUIRED and MUST BE attached to the return.
To complete the shareholder's basis information:

  1. Return to the K1S screen, available from the "Income" tab of the Data Entry Menu.
  2. Click the "Basis Worksheet" and "Basis Worksheet continued" tabs to enter basis information.
    The program automatically creates Form 7203 "S Corporation Shareholder Stock and Debt Basis Limitations," available in View/Print mode.

EF Message 5851:

PDF ATTACHMENT MISSING: One or more Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations, must be attached to the return. It must be attached as a PDF document.
Follow these steps to attach the PDF document to the return:

  1. From the toolbar in View/Print mode, select "Attach PDF." The form is attached automatically.
  2. Click "Exit."
  3. Recalculate the return to clear this message.


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