NOL for a defunct S-Corp

[mbigelow]

I have a new client whose S-corp ceased operations in 2013. His 2013 personal return shows an NOL from the S-corp that still has a balance. What becomes of the remaining NOL? Is it no longer allowed because he has no basis in the corporation? Is there somewhere else it can be taken? Thank you.

[Roland Slugg]

Your post isn't very clear, and I suspect it may be based on a misunderstanding.

An individual doesn't have "an NOL from an S Corp." He only reports the S Corp's pass-through income or loss on his own income tax return each year. If he, the individual, then has an NOL, it is not "an NOL from an S Corp" or from any other specific source. In other words, an NOL is not "source specific." Rather, it is simply an amount. It is then carried back 2 years and forward 20 years. An election can be made to forego the carryback and carry the NOL forward only.

[Snaggletooth]

S Corp is Gone

There can be no occurrence of an NOL for an S corp. There can only be suspended losses, where an accumulation of losses exceed the shareholders' basis.

It is possible for a legitimate S corp loss to create an NOL on a shareholder's PERSONAL return.

If the S Corp is "defunct" as you say, it should have been liquidated on a final 1120-S return. If, by reason of additional shareholder contributions related to the liquidation, additional basis becomes available, shareholder may benefit by taking whatever suspended losses are released. If the S-corp simply dies on the vine with suspended losses never released, the shareholder cannot take them.