Your investment in a pass-through entity, adjusted each year for income, losses, contributions, and distributions. It limits the losses you can deduct and determines whether distributions are taxable.
Distributions above basis are taxable gain, and losses beyond basis are suspended. The IRS now requires basis reporting on Form 7203 for S corporation shareholders, so a running basis schedule is not optional.
You do, or your preparer does. The K-1 does not show it. We maintain a basis schedule for every pass-through client.
Last reviewed September 15, 2026. Tax rules change; confirm current law before acting.
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