How are capital losses passed to the shareholders of a C Corporation?

Andreas · #1 (**permalink**) 02-22-2007, 07:21 PM

My Corporation sustained subtantial capital losses due to stock market conditions.
I was wondering how the individual shareholders can benefit from these losses, I personally had a great year in the stock market.

I am hoping that I can at least offset my gains against the losses from C Corporation.

Looking forward to hearing your opinion.Thank you.

TaxGuru · #2 (**permalink**) 02-24-2007, 11:47 AM

Regretably, the capital losses sustained by a C corporation are not passed through to the individual shareholders!

However, these losses are offset against other capital gains sustained from the corporations operations or investment activity. If there are no capital gains to offset these losses, then these losses are just suspended to the future years to be offset against against future possible gains.

In general, I would strongly advise you to discontinue using your C Corporation as a vehicle to participate in investment activity and day trading activity.

The fact and reality is that the C Corporations profits are not going to be offset against capital losses, and so the C corporations are stuck with net taxable income! Definitely not a good idea, if you have profits in your corporations, please take a salary and eliminate the tax liability in the C corporations rather than speculating in the stock market.