An S corporation shareholder who is not a passive investor is allowed to deduct a business loss allocation from the S corporation to the extent of the shareholder's basis in the stock no matter how large the loss.

Question

Quizplus · Accepted Answer

An S corporation shareholder can only deduct losses up to the extent of their adjusted basis in the S corporation stock plus any direct loans made by the shareholder to the corporation. If the loss exceeds this basis, the excess loss cannot be deducted in the current year.

An S Corporation Shareholder Who Is Not a Passive Investor