| The bad news is that you do not have sufficient basis to deduct these losses! The bank loan obtained was under the S Corporations name and despite the fact that you may have had a personal guarantee, by IRS code this does not increase your basis.
If however,you personally lent the corporation money,the extent of the loan would have created additional tax basis for you. The losses would then be deductible to extent of that basis.
Now, it seems the losses exceed your basis, the tax treatment for the S corporation is have these losses suspended for future years to offset taxable income, or else continue to have these losses suspended.
On the positive side, per your comment, you expect the business environment to significantly improve, thus these suspended losses will become realized and will offset the taxable income for the future years.
Last edited by TaxGuru : 03-24-2007 at 12:11 AM.
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