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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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I am subchapter S shareholder, active in the business, and

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I am subchapter S shareholder, active in the business, and the business lost money in 2009. My k-1 line 1 shows a loss of 9,292. Line 13 shows "M" and 406 credit - for increasing R & D credits. It was my understanding that this credit can be taken, even though the company had a loss in 2009. My bookkeeper thinks that the credit can only be taken if there is a profit. who is right, and what is the reference, please? Thank you very much!



First, you are only able to deduct the loss if you have basis. If not, the loss will be suspended.


The instructions for Form 3800 Line 1c state that if you are an individual, the allowed credit is limited to the amount of tax attributable to the taxable income of the S corp. As the corp had a loss, your credit will be suspended. I have provided a link to the instructions below.




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