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Old 08-19-2017, 03:03 PM
Join Date: Feb 2013
Posts: 35
Reporting S Corp Loss on Schedule D

S Corp basis is zero but it have a business loss in 2015, where on schedule D do I report the gain?


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Old 08-19-2017, 09:55 PM
Join Date: Oct 2010
Posts: 5,205
Any excess "negative basis reported on Sch E of 1120S is treated as a non-deductible loss. This excess loss is a "suspended loss" and carries over to future years indefinitely ; The suspended loss may be deducted in any future tax year during which the shareholder has restored her loan basis or stock basis.as a S corp shareholder, you can deduct corporate losses on your 1040. But you have to have ?basis? inyour S corp stock/debt. Basis starts with your investment in the corp, and it is increased by capital contributions and your share of S corp income. It is reduced by losses and distributions ? even if you don?t bother to deduct them on your 1040. There are 3 shareholder loss limitations:Stock and Debt Basis Limitations;At Risk Limitations;Passive Activity Loss Limitations. Each limitation must be met, and in the order presented, before a shareholder is allowed to claim a flow-through loss.The fact that a shareholder receives a SCh K-1 of 1120S reflecting a loss does not mean that the shareholder is automatically entitled to claim the loss.

S corp losses or deductions passed through to the shareholder first reduce stock basis. After stock basis has been reduced to zero, remaining loss amounts are applied against debt basis if you have. Debt basis is not reduced by pass through losses or deductions if the debt has been satisfied, disposed of, or forgiven during the corporation?s tax year. A shareholder of an S corp incurs suspended losses when his allocation of losses for the accounting period exceeds his outside basis in the business. Losses that exceed the individual?s taxable income in the S corp are suspended and subtracted from future income. Treatment of suspended losses is subject to at-risk limitations. The limitations of at-risk deductions must account for the shareholder?s contribution of capital and the funds the shareholder borrows to invest in the S corp. To this end, a shareholder is considered to be at risk if he bears personal liability for the repayment of borrowed funds - nonrecourse debt and interest invested in the S corp. Carry forward losses that exceed the shareholder?s at-risk level until such a time when the shareholder replenishes the at-risk level. Suspended losses from S corps due to lack of basis are not like suspended passive activity losses. They are lost when the shares are sold or if the stock becomes worthless.

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