Hello. Yes, I'm fine with waiting for an answer. Thank you.
Thank you for your explanation. It makes sense that in the year that this election is made, the taxpayer is advantaged to be able to utilize deductible losses prior to non-deductible losses first when there is a basis limitation, so as to maximize the allowable loss on the personal tax return.
However, over the course of a multiple year period in which there are annual losses in at least some of those years, isn't there a net disadvantage to making this election because overall, basis will end up lower as a consequence of always carrying over unused non-deductible expenses versus having them potentially go unused and non carried over in a basis-limited year (if the election had not been made)?
Also, I assume this election can be made in any year without consequence for past annual filings. Is that correct? Thank you
Thank you, XXXXX XXXXX makes sense in the scenario where the election is made. My question was meant to compare making the election vs. not making the election based on the impact over several years, not just year one. Sorry for not being more clear earlier.
Setting aside the assumed tax benefit of making the election in "year one," my question is if there is a net disadvantage to making the election vs NOT making the election within a multiple year period for a S Corp with some number of years of business losses because basis would ultimately be lower due to reducing basis by non-deductible expenses that would otherwise not have been carried over in those years of S Corp losses.
(My assumptions are (1) if the election is NOT made, then in a loss year where non-deductible expenses exceed basis, those expenses do not carry over and essentially have no impact to basis; (2) if the election IS made, then under the same circumstances, these expenses carry over indefinitely and thus will ultimately lower basis.)
Thanks for your patience, I appreciate your assistance.
Thank you for your clarifications and confirmations. I have only have one more question. Given everything you have explained, and comparing making the election to not making the election and only considering the long-term impact, that making the election will result in a lower long-term basis than not making the election. Is that correct?