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Dear Brass Tax Presentations,
Please help me with form 1120s on form 7203. My sister elected her LLC to be taxed in the 1120s. She has 200 common stocks in her S Corp, and she had zero stock basis on 1/1/2023, as noted in her form 7203. Suppose my sister transferred (as a gift to me, her brother) 100 common stocks at a $1 par value on 1/1/2023. How do I enter info on the $100 transfer in my sister’s form 7203 and my form 7203? It should decrease her stock basis by $100 and increase my stock basis by $100. But my sister had zero stock on 1/1/2023.
Thanks for your help.
From Brass Tax Presentations
The stock’s par value and the stock’s basis are two completely separate concepts. I would start by ensuring that the sister has zero basis on 01/01/2023. Generally, when a taxpayer gives a gift, they also give their basis in that gifted asset to the individual who receives it. So, if the sister has zero basis in the stock and then gifts half of her stock to her brother, then the brother’s basis in the stock he receives will also be zero.
If the sister has any losses suspended due to basis limitations, those losses will not transfer; they will stay on her own Form 7203.