Are suspended losses on S corporation shares deductible?
October 19, 2006
Date: Wed, 20 Sep 2006
Are suspended losses on S corporation shares deductible upon sale or if the stock becomes worthless?
Losses were suspended due to lack of basis and at risk rules.
Date: Wed, 04 Oct 2006
Suspended losses from S corporations 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.
The at risk rules are so closely related to the basis rules that I hesitate to tell you at risk suspended losses can be used to offset gains from the sale of S corporation stock. The basis limitation "trumps" the at risk limitation.
The purpose of the basis limitation is to limit the losses claimed by an S corporation shareholder to the amount invested in the corporation, including reinvested earnings.
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links