Shareholder'S Instructions For Schedule K-1 (Form 1120s)

the corporation participated in, or

distributions received during the tax

4. Basis is decreased by all

cooperated with, an international

year) and loans from you to the

deductible losses and deductions

boycott. See Form 5713 and its

corporation. For details and

reported on Schedule K-1 adjusted, if

instructions for details.

exceptions, see section 1366(d). The

the corporation made a charitable

basis of your stock is generally figured

contribution of property, by

Elections

at the end of the corporation's tax

subtracting your share of the

year. Any losses and deductions not

property's fair market value and

Generally, the corporation decides

allowed this year because of the basis

adding your share of the property's

how to figure taxable income from its

limit can be carried forward

adjusted basis.

operations. However, certain

indefinitely and deducted in a later

elections are made by you separately

year subject to the basis limit for that

You may elect to decrease your

on your income tax return and not by

year.

basis under (4) prior to decreasing

the corporation. These elections are

your basis under (3). If you make this

made under the following code

You are responsible for keeping the

election, any amount described under

sections.

information needed to figure the basis

(3) that exceeds the basis of your

Section 59(e) (deduction of certain

of your stock in the corporation.

stock and debt owed to you by the

qualified expenditures ratably over the

Schedule K-1 provides information to

corporation is treated as an amount

period of time specified in that

help you figure your stock basis at the

described under (3) for the following

section). For details, see the

end of each corporate tax year. The

tax year.

instructions for code J in box 12.

basis of your stock (generally, its cost)

Section 263A(d) (preproductive

is adjusted as follows and, except as

To make the election, attach a

expenses). See the instructions for

noted, in the order listed. In addition,

statement to your timely filed original

code M in box 12.

basis may be adjusted under other

or amended return that states you

Section 617 (deduction and

provisions of the Internal Revenue

agree to the carryover rule of

recapture of certain mining

Code. You can generally use the

Regulations section 1.1367-1(g) and

exploration expenditures).

Worksheet for Figuring a

the name of the S corporation to

Section 901 (foreign tax credit).

Shareholder's Stock Basis

to figure

which the rule applies. Once made,

your aggregate stock basis.

the election applies to the year for

Additional Information

which it is made and all future tax

1. Basis is increased by (a) all

For more information on the treatment

years for that S corporation, unless

income (including tax-exempt income)

of S corporation income, deductions,

the IRS agrees to revoke your

reported on Schedule K-1 and (b) the

credits, and other items, see Pub.

election.

excess of the deduction for depletion

535, Business Expenses; Pub. 550,

(other than oil and gas depletion) over

The basis of each share of stock is

Investment Income and Expenses;

the basis of the property subject to

increased or decreased (but not

and Pub. 925, Passive Activity and

depletion.

below zero) based on its pro rata

At-Risk Rules.

share of the above adjustments. If the

You must report on your

To get forms and publications, see

total decreases in basis attributable to

return (if you are required to

the instructions for your tax return or

a share exceed that share's basis, the

file one) any amount required

CAUTION

visit the IRS website at IRS.gov.

excess reduces (but not below zero)

to be included in gross income for it to

the remaining bases of all other

increase your basis.

Limitations on Losses,

shares of stock in proportion to the

Deductions, and Credits

Basis isn't increased by

remaining basis of each of those

income from discharge of your

shares.

There are potential limitations on

indebtedness in the S

corporate losses that you can deduct

Basis of loans. The basis of your

CAUTION

corporation (nor by any amount

on your return. These limitations and

loans to the corporation is generally

included in income with respect to

the order in which you must apply

the balance the corporation owes you,

clean renewable energy or (for bonds

them are as follows: the basis rules,

adjusted for any reductions and

issued before October 4, 2008)

the at-risk limitations, and the passive

restorations of loan basis (see the

qualified zone academy bonds).

activity limitations. These limitations

instructions for box 16, code E). Any

are discussed below.

amounts described in (3) and (4),

2. Basis is decreased by (a)

earlier, not used to offset amounts in

property distributions (including cash)

Other limitations may apply to

(1), earlier, or reduce your stock

made by the corporation reported on

specific deductions (for example, the

basis, are used to reduce your loan

Schedule K-1, box 16, code D, minus

section 179 expense deduction).

basis (to the extent of such basis prior

(b) the amount of such distributions in

Generally, specific limitations apply

to such reduction).

excess of the basis in your stock.

before the basis, at-risk, and passive

loss limitations.

3. Basis is decreased by (a)

nondeductible expenses and (b) the

Basis Rules

depletion deduction for any oil and

Generally, the deduction for your

gas property held by the corporation,

share of aggregate losses and

but only to the extent your share of the

deductions reported on Schedule K-1

property's adjusted basis exceeds

is limited to the basis of your stock

that deduction.

(determined with regard to

-2-

Instructions for Schedule K-1 (Form 1120S) (2016)

Shareholder'S Instructions For Schedule K-1 (Form 1120s) - 2016 Page 2

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