When an owner's share of S corporation losses exceeds the owner's basis in the corporation, all ordinary losses flow through to the owner before capital losses flow through.

Question

Quizplus · Accepted Answer

The owner can only deduct losses up to the extent of their basis in the S corporation. Any losses exceeding their basis cannot be deducted in the current year, regardless of whether they are ordinary or capital losses.

When an Owner's Share of S Corporation Losses Exceeds the Owner's