The Form 7203 is completed by individual taxpayers to track their stock and debt basis in an S corporation. If a shareholder receives a distribution in excess of their basis, they generally must recognize capital gains.
The Section 1.1368(g) election is available to S corporations that have ownership changes during the tax year. The election allows the S corporation to create separate tax years for allocating net income amongst the shareholders. This article covers the detailed rules and an example.
The IRS Form 7203 is included with a shareholders Form 1040 to track their stock and debt basis in the S corporation. This article and video covers a sample Form 7203.
