Q: What is the difference between Schedule K-1 (Form 1120S) and Form 7203?
A: Form 7203 is titled S Corporation Shareholder Stock and Debt Basis Limitations
Form 7203 and its separate instructions were developed, and revised in December 2022, to replace the three-part worksheet for figuring a Shareholder's Stock and Debt Basis formerly found in the Shareholder's Instructions for Schedule K-1 (Form 1120S).The intent is to provide greater precision for the amounts reported in Part II and Part III on Schedule K-1 (Form 1120S).
Form 7203 is submitted by the shareholder who is required to do so if he or she a) sells shares, b) receives a payout, or c) receives a loan repayment from the Subchapter S corporation. The IRS recommends shareholders complete and save Form 7203 in years where none of the above reporting requirements apply in order to better establish their Subchapter S corporation stock basis.
Course overview: Understanding Schedules K-1