7203

S Corporation Shareholder Stock and Debt Basis Limitations

Agency
IRS
Revision
Rev. December 2022
Fillable fields
188
Pages
2
Official source
IRS form page
Checked
October 21, 2026
Fill 7203 online
Page 1 of form 7203

Form 7203: S Corporation Shareholder Stock and Debt Basis Limitations

Form 7203 is S Corporation Shareholder Stock and Debt Basis Limitations. The IRS says S corporation shareholders use it to figure the potential limitations of their share of the S corporation's deductions, credits, and other items that can be deducted on their individual returns.

The form has three parts: stock basis, debt basis for loans the shareholder made to the corporation, and allowable loss and deduction items. The instructions say the deduction for a shareholder's share of losses and deductions on Schedule K-1 (Form 1120-S) is generally limited to the basis of the stock and loans to the corporation, and amounts not allowed can be carried forward indefinitely. Form 7203 replaced the worksheet for figuring stock and debt basis formerly in the Shareholder's Instructions for Schedule K-1 (Form 1120-S).

The form says to attach it to the tax return. You can fill out Form 7203 free in your browser on this page and download the result without an account.

Top of page 1 of Form 7203: S Corporation Shareholder Stock and Debt Basis Limitations, as printed by IRS

What's on Form 7203

Header and items A to E

Shareholder name and identifying number, the S corporation's name and EIN, the stock block (item C), how the stock was acquired (item D), and a box for a Regulations section 1.1367-1(g) election (item E).

Part I: Shareholder stock basis

Lines 1 to 15 start with stock basis at the beginning of the corporation's tax year, add contributions and income items on lines 3a to 3m, subtract distributions, nondeductible expenses and allowable losses, and end with stock basis at year end.

Part II, Section A: Amount of debt

Lines 16 to 20 track up to three loans, each a formal note or open account, from the beginning balance through repayments to the year-end balance.

Part II, Section B: Adjustments to debt basis

Lines 21 to 31 adjust debt basis for new loans, restoration, nontaxable repayments, nondeductible expenses and losses in excess of stock basis.

Part II, Section C: Gain on loan repayment

Lines 32 to 34 subtract nontaxable repayments from the repayment to show reportable gain.

Part III: Allowable loss and deduction items

Lines 35 to 47 list each loss and deduction item in columns for current year amounts, carryover from the previous year, the loss allowed from stock basis and from debt basis, and carryover amounts.

How to fill out Form 7203

  1. 1

    Header

    Enter the name shown on Schedule K-1 (Form 1120-S) and the S corporation's name and EIN. Use item C for a stock block, check how the stock was acquired in item D, and check item E if a Regulations section 1.1367-1(g) election is in effect.

  2. 2

    Lines 1 to 5

    Line 1 is stock basis at the start of the corporation's tax year, which the instructions say should match the prior year's ending basis unless it is the first year. Line 2 adds capital contributions or stock acquired, not loans. Lines 3a to 3m take only positive income amounts from Schedule K-1 (Form 1120-S).

  3. 3

    Lines 6 to 15

    Line 6 is distributions from Schedule K-1 (Form 1120-S), box 16, code D. If line 6 is larger than line 5, the form says to report the excess as a capital gain on Form 8949 and Schedule D. Then subtract nondeductible expenses, allowable losses and other decreases to reach line 15.

  4. 4

    Part II for loans

    The instructions say Part II is completed for money personally loaned to the corporation, with each formal note in its own column. An open account debt with a year-end balance of more than $25,000 is classified as a formal note at the start of the next tax year.

  5. 5

    Part III

    Enter each loss and deduction from Schedule K-1 (Form 1120-S) in column (a) and prior-year carryovers in column (b). Columns (c) and (d) allocate them against stock basis and debt basis, pro rata when basis is not enough, and column (e) holds the amount carried forward.

  6. 6

    Line 34 gain

    The instructions say gain on repayment of a formal note is capital gain reported on Form 8949 and Schedule D, and gain on open account debt is ordinary gain reported on Form 4797.

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Where it goes and limits that follow

Where it goes

The form says to attach it to the tax return. It is not filed on its own.

Order of loss limits

The instructions list the order: basis limitations (Form 7203), at-risk limitations (Form 6198), passive activity loss limitations (Form 8582) and excess business loss limitations (Form 461).

Partial sale or redemption

If part of the stock is redeemed, sold or otherwise disposed of during the year, the instructions say to attach two separate forms: one for stock basis at the date of sale and one for stock and debt basis at year end.

Guaranteed loans

The instructions say loans a shareholder guarantees or co-signs are not part of loan basis except to the extent the shareholder makes a payment on them.

Records

The instructions say the shareholder is responsible for keeping the information needed to figure the basis of the stock.

Related forms

Who files Form 7203?

  • Shareholders claiming a loss

    Shareholders claiming a deduction for their share of an aggregate loss from an S corporation, including an aggregate loss not allowed last year because of basis limitations.

  • Non-dividend distributions

    Shareholders who received a non-dividend distribution from an S corporation.

  • Stock dispositions

    Shareholders who disposed of stock in an S corporation, whether or not gain is recognized.

  • Loan repayments

    Shareholders who received a loan repayment from an S corporation.

  • Spouses on a joint return

    If spouses filing jointly each received a Schedule K-1 (Form 1120-S), the instructions say to complete a separate Form 7203 for each spouse.

  • Years it is not required

    The instructions say it may be beneficial to complete and retain Form 7203 even for years it is not required, so basis is consistently maintained year after year.

The instructions say Form 7203 is filed by S corporation shareholders in these situations.

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Questions about Form 7203

Who files Form 7203?

The instructions list S corporation shareholders who claim a deduction for their share of an aggregate loss, received a non-dividend distribution, disposed of stock, or received a loan repayment from the S corporation.

Where does Form 7203 go?

The form says to attach it to the tax return.

What happens to losses above basis?

The instructions say losses and deductions in excess of basis are suspended and carried forward indefinitely, and keep their character. Part III, column (e) tracks the carryover.

Does a guaranteed loan count toward debt basis?

The instructions say loans a shareholder guarantees or co-signs are not part of loan basis except to the extent the shareholder makes a payment on them.

What if a distribution is more than stock basis?

The form says to subtract line 5 from line 6 and report the result as a capital gain on Form 8949 and Schedule D.

Do spouses filing jointly share one form?

No. If each spouse received a Schedule K-1 (Form 1120-S), the instructions say to complete a separate Form 7203 for each spouse.