Dear TaxGuru,

I dont understand why the basis is a big issue for S corporations? What is the significance and how does limit my ability to deduct my S Corporation losses?

Dear Dwhite,

The amount of shareholder basis is a big issue for S Corporations because this is the amount that restricts the deductibility of pass through losses ( K-1 Losses) at the shareholder level.

In other words, generally, any losses are deductible only to the extent of shareholder Basis