Schedule E, Page 2, Line 28 Basis Computation Check Box

[G2R]

Was reading an article from Kiplinger regarding expanded cases when on Schedule E, Page 2, Line 28, the box labeled "check if basis comp required" is checked.  I'm about to file my only S Corp return this year that has a loss to report and I can't see how ATX even utilizes this box unless I override.  Even in the K-1 Detail Anyone ever check this box without an override and if so, how?  

And while we're discussing it, how many are actually doing the basis computation and including it with the return when their reporting a loss?  I've spoken to other accountants who looked at me like I had three heads when I mentioned it.  

[Lion EA]

I think you include the basis computation when losses, distributions, &/or sales. Distributions might be distributions in excess of basis, but how would you indicate whether the distribution was not in excess unless you showed the basis computation?

[Richcpaman]

21 hours ago, GGRNY said:

And while we're discussing it, how many are actually doing the basis computation and including it with the return when their reporting a loss?  I've spoken to other accountants who looked at me like I had three heads when I mentioned it.  

GGRNY:

Lots of preparers do not have a clue how to prepare a return above the most basic returns.  The rules changed in the past two years and now we are required to provide a basis worksheet with every K-1. 

Not that the IRS is going to do anything with that info....

IF this is your only S-Corp, then I congratulate you on paying attention.

Rich

 

 

[Catherine]

22 minutes ago, Richcpaman said:

a basis worksheet with every K-1. 

Not that the IRS is going to do anything with that info....

Oh they might!  We've seen questions from the IRS about claiming losses when we don't have the basis worksheet (only when someone else is doing the 1120-S).  They want to know there is basis before they allow.

[G2R]

19 hours ago, Richcpaman said:

IF this is your only S-Corp, then I congratulate you on paying attention.

19 hours ago, Catherine said:

Oh they might!  We've seen questions from the IRS about claiming losses when we don't have the basis worksheet (only when someone else is doing the 1120-S).  They want to know there is basis before they allow.

Interesting.  I have filed other S-Corp owner returns, but this is the first with a loss so it piqued my interest.  
I can see them sending letters for lack of basis reporting if a loss if reported or stock disposal, but I wonder how much enforcement there will be for distributions only as I would think most S-Corp shareholders have distributions. 

 

19 hours ago, Richcpaman said:

The rules changed in the past two years and now we are required to provide a basis worksheet with every K-1. 

It's my understanding that reporting the basis information is only required if a shareholder reports a loss, receives a distribution, disposes of stock, or receives a loan repayment from the S corporation.

[G2R]

Oh, I still don't see how to enter this information into ATX without overriding a box.  Any clue how to get the new Schedule 2, page 2, line 28 box to be check-marked in the first place? 

[mircpa]

Losses shown on Line 1 of K1 gets entered on K1 input screen of individual tax return & put check mark on calculate basis limitation & if you go further down on same input screen you would see basis limitation worksheet. For example if it has 10K of losses & if during the year taxpayer has pumped 10K as capital or loan this money into corporation then you would punch this amount on shareholder stock basis or loan basis then it carries this 10K losses on page 2 of Sch E. If you have losses greater than stock or loan basis these losses would not show on page 2 of Sch E but simply carries to future years to offset any future income.

Remember whole premise is losses are deductible only to the extent of basis.

[G2R]

12 hours ago, mircpa said:

Losses shown on Line 1 of K1 gets entered on K1 input screen of individual tax return & put check mark on calculate basis limitation & if you go further down on same input screen you would see basis limitation worksheet.

This is what I've already done so thank you for confirming it.  My belief that I was still somehow overriding it was based on the DETAIL tab of the 1120S K-1 data entry.  When I check mark the "calculate basis limitation" box on the K-1 1120S K-1 INPUT tab:

 

 

I then get the pink "override" boxes automatically filled in on the DETAIL tab.

 

 

 

Not sure why ATX would do that since it makes you think you've done something wrong, but things flow through nicely and line up with my paper copy so I'm happy.  Thanks for all the insight everything.