Dear Mr. Ask Tax Guru,
Thank you for your generous knowledge sharing and for operating this forum!
- My single-member LLC S-Corp has existed since Feb 2016.
- The S-Corp financial records are well kept in Quickbooks Desktop Accountant 2015.
- The S-Corp has e-Filed the 1120s for tax years 2016, 2017, 2018.
- I used H&R Block Business (HRB) to make these e-Filings.
- In HRB the Shareholder's Basis Statement is not available for user input. It is generated automatically during e-Filing or printing. In HRB 2018 the print preview facility enables the user to see this form before e-Filing or printing.
- I am concerned HRB did not properly calculate the Shareholder's Basis Statement for 2016, the S-Corp's initial year. If so, then this error has been carried through to subsequent years 2017 and 2018.
I have been unable to find instructions for calculating my own Initial Year 2016 Shareholder's Basis Statement.
Is it as simple as (there may be minor adjustments not shown here):
+ Initial Capital Contributed ? Business Gain/Loss = Approximate Basis?
132,402 - 16,456 = 115,946? (approximate)
HRB 2016 Shareholder's Basis Statement Ending Balance = 98,544.
That's a difference of 115,946 - 98,544 = 17,402!
How is first-year Shareholder's Basis calculated? Is HRB correct?
I've attached a 2-page pdf showing the main S-Corp financials for 2016.
It is also not clear to me where this number would appear in the tax filings other than on the Shareholder's Basis Statement. Am I correct in presuming that the IRS does track this number to ensure that Distributions in excess of Basis are taxed as capital gains?
Thank you very much for your help!
The 2016 1120S K-1 and Instructions for Figuring a Shareholder's Stock Basis
appear to validate my guess above: + Initial Capital Contributed - Business Loss = Approximate Basis.
Line 2 reads: "Money and your adjusted basis in property contributed
to the corporation.
What has confused me is that this is similar to line 2 of Schedule M-2 AAA, but that line appears to be limited to Income
and does not appear to include Contributions
-- except for the first year?
I really need clarity on this. If Contributions can be included on M-2/AAA Line 2 in Year 1. then HRB is shown to be in error and I can remedy the situation by filing amended returns.