Discussion:S corp loss in excess of basis "suspended"
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Discussion Forum Index --> Consumer Questions --> S corp loss in excess of basis "suspended"
| 5 July 2009 | |
| When is the loss in excess of basis deducted on the shareholder return. I understand when basis is increased but what about a total disposition or closing of the company?
Is the distribution in excess of basis treated as a short term or long term capital gain? My client has the excess distribution over a few years in a corporation that is 8 years old. Also the corporation is in debt 250k which is how my client was able to take the excess basis distributions. My client has personally guaranteed repayment and is repaying the loan to the bank. Is the excess distribution taxable? The debt is primarily the responsibility of the S corp. | |
Harry Boscoe (talk|edits) said: | 5 July 2009 |
| "When is the [shareholder's suspended S corporation] loss in excess of basis deducted on the shareholder return[?] I understand when basis is increased but what about a total disposition or closing of the company?"
If a shareholder of an S corporation has suspended losses from the S corp, the losses will be deductible when the shareholder has enough basis to allow the deduction. If the shareholder disposes of his stock, or if the "company closes," and the shareholder never gets enough tax basis to allow the deduction of the suspended losses, he never gets to deduct the losses. It's not a big surprise, I hope, that the shareholder's allowable/deductible/deducted losses won't exceed what he invested. Sorta logical, in a way. Nothing in, nothing out. [I wanted to say "no tickee, no shirtee" but my political correctness editor didn't allow it.] | |
| July 5, 2009 | |
| So as he repays that loan, he's increasing basis, and can take deductions along the way. Or, if it's rewritten as a personal loan, same thing. | |
