S corporation losses allocated to a shareholderthat are not deductible due to the tax-basis limitation rules are carried over by the shareholder to future years for potential utilization.

Question

Quizplus · Accepted Answer

This is correct according to the tax law. S corporation losses are passed through to shareholders and subject to the tax-basis limitation rules. If a shareholder's basis is not sufficient to deduct losses, the excess losses are carried forward to future years for potential utilization when the shareholder's basis is increased.

S Corporation Losses Allocated to a Shareholderthat Are Not Deductible