Schedule K-1 (Form 1120-S) Boxes 7 and 8 (2025 Instructions)

Updated October 16, 2026. Quick answer: Boxes 7 and 8 of Schedule K-1 (Form 1120-S) show a shareholder’s share of the S corporation’s capital gains and losses: net short-term gain in box 7, net long-term gain in box 8a, collectibles gain in box 8b and unrecaptured section 1250 gain in box 8c. The 2025 instructions send box 7 to Schedule D line 5 and box 8a to line 12, and send box 8b to line 4 of the 28% Rate Gain Worksheet, after the limits on losses, and box 8c to the Unrecaptured Section 1250 Gain Worksheet.

What boxes 7, 8a, 8b and 8c report

These boxes are capital gain items. The instructions group them with interest and dividends as “Portfolio income or loss (shown in boxes 4 through 8b and in box 10, code A) isn’t subject to the passive activity limitations.” This page covers the shareholder’s side of a K-1 that was received. Every other box is set out on the Schedule K-1 (Form 1120-S) boxes overview.

Capital gain from the corporation is separate from gain on the shareholder’s own stock. “Gain or loss from the disposition of your S corporation stock may be net investment income under section 1411 and could be subject to the net investment income tax.” “See Form 8960, Net Investment Income Tax”, and the tax is covered on the net investment income tax page.

Where each box goes

The table sets the label printed on the K-1 beside the instruction. Boxes 7, 8a and 8b each start with the same condition: the report comes “After applying the limitations on losses and deductions”.

Boxes 7 and 8a: short-term and long-term gain

Box 7 and box 8a are the two ordinary capital lines. “After applying the limitations on losses and deductions, report the net short-term capital gain (loss) on Schedule D (Form 1040), Capital Gains and Losses, line 5.” “After applying the limitations on losses and deductions, report the net long-term capital gain (loss) on Schedule D (Form 1040), line 12.”

Schedule D is covered on the Schedule D (Form 1040) page. Form 8949, explained on the Form 8949 page, covers sales of capital assets that a shareholder made directly. Both boxes also carry a pointer back to the limits: “See Limitations on Losses, Deductions, and Credits, earlier.”

Box 8b: collectibles gain

Box 8b is the 28 percent rate item. “After applying the limitations on losses and deductions, report collectibles gain or loss on line 4 of the 28% Rate Gain Worksheet”, which is printed in the Instructions for Schedule D (Form 1040) as the worksheet for line 18. The instruction names a worksheet and a worksheet line for the amount.

Box 8c: unrecaptured section 1250 gain

Box 8c has three types. “There are three types of unrecaptured section 1250 gain.” “Report your share of this unrecaptured gain on the Unrecaptured Section 1250 Gain Worksheet” in the Instructions for Schedule D (Form 1040), the worksheet for line 19, on the line that matches the type:

The box itself depends on how many types the corporation has. “If the corporation reports only unrecaptured section 1250 gain from the sale or exchange of its business assets, it will enter a dollar amount in box 8c.” “If it reports the other two types of unrecaptured gain, it will provide an attached statement that shows the amount for each type of unrecaptured section 1250 gain.”

Recapture of depreciation on real property is explained on the depreciation recapture page; the K-1 instruction above only tells the shareholder which worksheet line to use.

Basis, at-risk and the other limits

The instructions put the limits in a fixed order: “These limitations and the order in which you must apply them are as follows: the basis limitations, the at-risk limitations, the passive activity limitations, and the excess business loss limitations.” The amounts printed in Part III are before any of them. “The amounts shown in boxes 1 through 17 reflect your share of income, loss, deductions, credits, and other items from corporate business or rental activities without reference to limitations on losses, credits, or other items that may have to be adjusted”.

Basis is the shareholder’s own record to keep. “You are responsible for keeping the information needed to figure the basis of your stock in the corporation.” “Any losses and deductions not allowed this year because of the basis limit can be carried forward indefinitely and deducted in a later year subject to the basis limit for that year.”

The passive step comes last of the three. “When applicable, the passive activity limitations on losses are applied after the limitations on losses for a shareholder’s basis in stock and debt and the shareholder’s at-risk amount.”

Some items carry their own limit first. “Other limitations may apply to specific deductions (for example, the section 179 expense deduction). Generally, specific limitations apply before the at-risk and passive loss limitations.”

Consistency and the year to use

The shareholder reports what the corporation reported. “Generally, you must report corporate items shown on your Schedule K-1 (and any attached statements) the same way that the corporation treated the items on its return.” If a figure looks wrong: “If you believe the corporation has made an error on your Schedule K-1, notify the corporation and ask for a corrected Schedule K-1.” “Don’t change any items on your copy of Schedule K-1.”

Fiscal-year corporations shift the year. “If you file your tax return on a calendar-year basis, but the corporation files a return for a fiscal year, report the amounts on your tax return for the year in which the corporation’s fiscal year ends.”

Which revision applies

The edition read for this page is the 2025 Shareholder’s Instructions for Schedule K-1 (Form 1120-S) and the 2025 Schedule K-1 (Form 1120-S) itself, which are the revisions irs.gov served when they were read on 2026-10-16. Check the revision printed on the Schedule K-1 you received and the matching instructions, because a later edition can change the box layout, the column letters and the reporting lines.

Common mistakes

• Putting box 8b or 8c on Schedule D line 12 with box 8a. The instructions send collectibles gain to the 28% Rate Gain Worksheet and unrecaptured section 1250 gain to its own worksheet, each with its own line.
• Reporting a capital loss before applying the limits. Each of boxes 7, 8a and 8b begins with the instruction to apply the limitations on losses and deductions, and basis comes first in the stated order.
• Treating the one dollar amount in box 8c as the whole figure. The instructions say the corporation enters a single amount only when it has just business-asset gain, and otherwise attaches a statement for each type.

Related: Schedule D (Form 1040), Form 8949 sales of capital assets, depreciation recapture taxed in year one, net investment income tax, and Schedule K-1 (Form 1120-S) boxes explained.

Sources

• 2025 Shareholder’s Instructions for Schedule K-1 (Form 1120-S): https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf
• Schedule K-1 (Form 1120-S) (2025), Shareholder’s Share of Income, Deductions, Credits, etc.: https://www.irs.gov/pub/irs-pdf/f1120ssk.pdf

Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.