IRS Form 7203 - Capital Gain on Distributions in Excess of Basis

Описание: Visit our Form 7203 playlist for more examples:
   • Form 7203 Basis Calculations for S Corpora...  

In this example Form 7203, I discuss what happens when an S corporation shareholder receives a distribution that exceeds their stock basis.

Distributions in excess of stock basis are covered in IRC Section 1368(b). If a shareholder receives a distribution in excess of basis, they must record a capital gain for the excess. The capital gain is either long-term or short-term depending upon the holding period of the investment.

The capital gain is reported on Form 8949 & Schedule D.

IRS Form 7203 is required with a taxpayer's Form 1040 tax return if the shareholder has one of the following during the tax year:
1. The shareholder is claiming a deduction for their share of losses from the S corporation (this includes prior year losses);
2. The shareholder received a non-dividend distribution from the S corporation;
3. The shareholder disposed of stock (complete or partial disposition) during the tax year; or
4. The shareholder received a loan repayment from the S corporation.

My recommendation is to always file Form 7203 to track stock & debt basis, even under circumstances where the form was not required.

For more 2022 tutorials on Form 1120-S, please see the following playlist:
   • Form 1120-S (S Corporation) Tutorials  

For other form tutorials that might be applicable to your return, check our videos here:

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Schedule B-1 Disclosure:    • Form 1120-S Schedule B-1....Disclosure of ...  
Form 8869 Q Sub Election:    • How to Prepare IRS Form 8869 - Qualified S...  
How is Income Allocated?    • How Is Income Allocated for an S Corporati...  
S Corp Debt Forgiveness:    • S Corporation Debt Forgiveness - Is it Tax...  
S Corp Restricted Stock:    • S Corporation Restricted Stock Disclosures...  
Deducting Business Gifts:    • Can Business Gifts Be Tax Deductible?  
Did your S corp election terminate?    • Inadvertently Terminate your S Corporation...  

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