S Corp carryback loss

[Bill Tubbs]

Client is a major shareholder in an S Corp (as well as a partner in a partnership, and his wife works and will receive W-2). S Corp is expected to have a loss, about $25,000 is attibutable to client. He has enough basis in the S Corp that the loss would all be deductible on Sch E. Further, the loss would not cause a NOL on his personal return as his other income would be more than the amount of this loss.

Now enter the American Recovery and Reinvestment Act of 2009, the fact that the S Corp qualifies as an eligible small businesses (ESBs), and my confusion. Does the S Corp elect to carry back the NOL for 2009 for 3, 4 or 5 years? Or does my client (a shareholder in the S Corp) have the option of carrying back his share of the loss from 2009 to a prior year?

Thanks,
Bill

[Jiggers]

No S-Corp Loss carryback

The S-Corporation does not carry back any loss

The loss is passed through to the shareholder on the K-1.

The shareholder deducts the loss on his tax return.

There is no benefit to carry an S-Corporation loss back as the S-Corporation does not pay taxes.