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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 322
Experience:  Tax Accountant at Praxair, Inc.
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The s corp has the following losses in prior years..

Customer Question

The s corp has the following losses in prior years..
2010.....12300.00 gain
2011.....11300 gain
2013.....13450 gain
In 2015 the s corpo sold for 360K. the allocation was 60k assets and 300k goodwill.
can the priror losses or accumulated losses offset against the capital gains which is 300k ?
Submitted: 1 year ago.
Category: Finance
Expert:  Jonathan Tierney replied 1 year ago.
Hi, my money is Jonathan and I can help. S corporations pass on all their income, deductions, and credit on to their shareholders who are then obligated to pay any taxes or may take deductions for their losses. However, there are three levels of limitation of loss deduction for shareholders' of S corporations. Those limitation are basis, at-risk, and passive activity limitation. Shareholders' commonly run into problems with the basis limitation as shareholders' basis in their S corporation stock is adjusted each year based upon the items of income and deduction passed over to them by the S corp. You are unable to deduct losses if you no longer have any basis. Assuming you started with $150K in basis, I have attached an example spreadsheet to show you have been able to deduct any losses or have to carry them forward. In the example attached would you have loss carryforwards of $111,959 which the shareholder (if there is only one) would be able to use to offset the S corporations gains. I hope this explanation makes sense, with the main point being is would depend on the shareholder's basis in determining whether any losses can be utilized. Please let me know if I can clarify anything or answer any additional questions.
Expert:  Jonathan Tierney replied 1 year ago.
It might be easier if you want talk the phone, so I will post an additional service offer. Thanks, Jonathan

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