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S corp basis and losses

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Hi there-

I am just working on figuring out how the basis works in S corps. What happens with loss carryovers when there is no basis? Is this then used to reduce basis in future years when income is generated? Also, I know shareholders aren't allowed to take distributions in excess of basis but can they still claim the loss that passes through on the K-1?

Thanks for sharing, I've seen a few people on this board interetsed in starting to do S corp returns so maybe this will help others as well.

Julie

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Posted · Report post

no... the loss is carried over

if they do take distribution in excess of basis then it is taxable on the 1040

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Posted · Report post

Hi there-

I am just working on figuring out how the basis works in S corps. What happens with loss carryovers when there is no basis?

There is NO net operating loss carryover on the S-corp tax returns. All net operating losses are passed in full to the shareholders and the shareholders determine their tax basis for deduction or carryover any balance they cannot deduct for future years deduction when tax basis will allow. Tax basis for deduction is always determined at the shareholder level which may or may not be the same as shown by the S-corp books and records.

Shareholders are allowed to take distributions in excess of their individual tax basis, however, the distribution would then be taxable as though shares of stock had been sold (1040 Sch-D).

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