New requirement for shareholder basis statement

Proseries has it completely sdrawkcab if what JR1 said is true.

Basis can't really be tracked accurately by the corporation. What if the shareholder bought his shares from another shareholder and did not get them from the S corporation directly? How would the S corp know what he paid for them? And how does the S corp know whether or not the shareholder has made the election to take losses and deductions before non-deductible expenses? That election can have a big affect on the basis calculations.

Puzzling to me that so many preparers seem to try to do this from the wrong end and look to the S corp returns. Almost like looking at someone's birth certificate to find out what college they went to.

Well, yes and no. Theoretically, you're absolutely right.

But most of the corporate returns that would be prepared in many packages including Proseries would be smaller, more closely-held corporations with potentially less sophisticated owners where the information (especially loans to the corporation) would be best found in the corporate files. And with these smaller corporations, as a preparer you'd want to have basis information at the corporate level to help with depreciation elections, etc.

So I did the same return in Drake and Proseries wher client had small loss on K1-S.

Proseries takes the loss on the 1040 no questions asked. No basis worksheet, nothing.

Drake doesn't take the loss unless you enter basis in the worksheet than you get the diagnostic that an attachment is required on how basis was figured.

What gives. I've used Drake for about 5 years now and had used Proseries before that. Am contemplating returning to Proseries because of the diagnostics, it handles states better, and a few other things. But the fact that it's taking a loss with no basis entered is a concern.

Figured it out on Proseries.

You have to check "some investment not at risk" on the K1.

Then goto 6198wks part 2 and enter the adjusted basis.

Only drawback is you'll have to track basis separately or probably pay an extra $10 and intuit will sell you a worksheet.

Nice thing about Drake is that it has a basis worksheet... hmmm.. decisions.

This discussion about a "requirement" mentioned on page 2 of Schedule E for the 2018 Form 1040 (which apparently was not found on the 2017 Schedule E) makes me think of the question: To what extent does the Internal Revenue Service (that is, "the Secretary of the Treasury or his delegate") have the legal authority to "require" that a certain specific item of information be reported to the IRS, or that a particular record be kept?

Any person [ . . ] required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to [ . . . ] make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution [ . . . ]

--from 26 USC section 7203 (emphasis added).

Every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary [of the Treasury or his delegate] may from time to time prescribe [ . . . ]

--from 26 USC section 6001 (emphasis added).

When required by regulations prescribed by the Secretary [of the Treasury or his delegate,] any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations.

--from 26 USC section 6011(a) (emphasis added).


Suppose the "Secretary of the Treasury or his delegate" promulgates an official Treasury regulation "requiring" filers of Federal income tax returns to include a statement listing every single cash receipt and disbursement for the year, regardless of how small, regardless of whether the receipt is taxable, and regardless of whether the disbursement is being claimed as a deduction. Would this be a legally binding requirement?

Much of the information that apparently is "required" by the official IRS forms and instructions is not specifically identified in the statutes or Treasury regulations.

Is there any legal limit to what the Secretary can "require" where the "requirement" is found in an official Treasury regulation, but not in the statutes?

And, is there any legal limit to what the Secretary can "require" where the "requirement" is found only in the forms and instructions, but not in any statute or official Treasury regulation?

I've always used the 6198 in Proseries to keep my taxpayer basis from year to year (along with the basis stmt from the S corp also)

Now there is the 7203.

Do we use one, the other, or both ?

This is really nice to see on April 12th !

Form 6198 is for at-risk limits not basis. They are not the same thing.

edit: example

I start a new S corp and put 10,000 in a business bank account. I borrowed 4,000 of it from my wealthy father in law. My basis is 10,000 but my at-risk amount is 6,000

But if FIL gives you the cold stare across the Thanksgiving table that makes it recourse and we're back to $10k at-risk.