S Shrholder Loan Basis
S Corp shareholder paid part of his shareholder loan back. Still has remaining loan basis. The 1120S K-1 basis statement shows the reduced loan basis. Loan basis was restored by profit. On the shareholder 1040 basis worksheet, part of the loan repayment is showing as reportable income. I can't determine why this doesn't match the 1120S basis statement and not show any part as taxable income. I seem to vaguely recall that loan repayment is considered done during the year while profit restor
I think your problem is that, as you said, the loan has a reduced basis during the year when repayment occurs and the loan basis may have been restored at year end. The repayment with loan basis at less than face value does create taxable income to the shareholder, and its character is dependent on the loan itself. If the loan has been formalized with its terms then the income triggered by repayment will be capital gain. If, on the other hand, if the loan is open ended and not formalized, then