Scorp carryforward loss

[Taxadvisor VA]

Can an Scorp carryforward loss left after being applied against ordinary income be used to offset a gain on disposition of Section 179 asset? In my question, a truck was purchased in 2007 (Sec 179 claimed that year) and now sold in 2012.
Thanks,
Taxadvisor VA

[Golden Rocket]

My Answer

for what it's worth.

Deductibility of Loss is assured so long as basis does not fall below zero, but you probably already knew that.

In the calculation of basis, it is my belief that the inclusion of "income" includes income and expense of every category
on the K-1 other than those line items which are information only or duplication of items already included.

Income from a partnership, for example, would include the line items for ordinary income, capital gains, s.179 expense,
contributions, and any other kind of income distributed. (basis also includes nontaxable income and nondeductible expense).
It would NOT, however, include the line item that shows "Income from Self-Employment" because all of this income is included
elsewhere in other categories.

[DaveinTexas]

Your phrasing of this question begs another question

Can an Scorp carryforward loss left after being applied against ordinary income be used to offset a gain on disposition of Section 179 asset? In my question, a truck was purchased in 2007 (Sec 179 claimed that year) and now sold in 2012.
Thanks,
Taxadvisor VA

HUH?

1. A carryforward loss in an S Corp, what is that? Do you mean a disallowed loss from a prior year due to basis limitations? PYA?
2. A gain on a Section 179 asset would be reported on the shareholders' form 4797, not on the 1120s' form 4797. This gain would be ordinary income if the basis was reduced to zero by taking the 179 deduction.
3. Any losses previously disallowed due to basis limitations will be allowed if during the year the sharholder's basis was restored by adding capital/making loans to the Corporation.
4. The losses, assuming there is no current year profit, will offset ordinary income (including the ordinary income reported from the sale of the Section 179 asset).
5. Really consider taking an S Corp class as this answer barely scratches the surface of the knowledge you need to accurately prepare an 1120S; I really mean no disrespect when saying this. I take a very rigorous class every year on pass through entities and I leave thinking, "now what did he say?"

So, in a way, the answer to your question is "yes" but the phrasing of your question suggests you want the A to Z answer by skipping all of the goodies in between.

And as always, be sure to read the disclosure below; about this time of the year my mind has been scrambled!!