How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

If a S Corp Owner had accumulated losses exceeding their

Customer Question

If a S Corp Owner had accumulated losses exceeding their basis and it is the final year for the business, can those losses be recouped or are they permanently lost as a result of closing the business?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

That would be true for passive losses - these are fully deductible when the passive activity is sold or otherwise disposed in fully taxable transaction.
Regarding S-corporation losses - it’s use them or lose them.
See here
https://www.law.cornell.edu/uscode/text/26/1366
(3) Carryover of disallowed losses and deductions to post-termination transition period

(A) In general

If for the last taxable year of a corporation for which it was an S corporation a loss or deduction was disallowed by reason of paragraph (1), such loss or deduction shall be treated as incurred by the shareholder on the last day of any post-termination transition period.

(B) Cannot exceed shareholder’s basis in stock

The aggregate amount of losses and deductions taken into account by a shareholder under subparagraph (A) shall not exceed the adjusted basis of the shareholder’s stock in the corporation (determined at the close of the last day of the post-termination transition period and without regard to this paragraph).

That actually means - if losses are not used withing one year after they are realized - they are completely "lost"
Sorry if you expected differently.

Related Tax Questions