S Corp basis & PPP loan forgiven

For 2021 S corporation has a PPP Loan formally forgiven. In addition, for 2021 the S Corp has a loss. Does the PPP Loan forgiven create basis for the shareholders?

Yes, it's tax-exempt income in the year it's forgiven. Tax-exempt income increases a shareholder's basis. The tax-exempt income increase to basis should take place before the basis is decreased by the loss, so the loss should not be disallowed due to basis limitations.

thanks

Yes, it's tax-exempt income in the year it's forgiven

or in the year that they applied for loan forgiveness, or in the year that the expenses resulting in loan forgiveness were paid/incurred.

Many practitioners, including the famed Tony Nitty, have taken the position that if the PPP loan was less than the $150K EZ forgiveness application limitation, the PPP loan was essentially forgiven in the year it was received. This assumes the taxpayer would meet the spending thresholds for forgiveness. This would then become T/E income in the year the loan was received.

It increase basis but has to be reflected on Schedule M2 column d other adjustment accounts.

Section 3.01 of Rev Proc 2021-48 seems to give us 3 choices on timing. https://www.irs.gov/pub/irs-drop/rp-21-48.pdf

Rev Proc 2021-48 gives the ability to amend returns to reflect the treatment of loan forgiveness in the year the forgiveness application was filed. This could be helpful for S-Corps with AAA limitations or excess distributions. The question I have is at what threshold would the taxpayer want to amend considering the IRS backlog of processing amended returns.