I have a client who has a loss in his s corporation for 2019. He has debt basis, but not stock basis. My question: Is it mandatory that losses be deducted from debt basis when debt basis exists, or is it optional? My Drake software is applying the loss to the debt basis automatically with no option to change it. So, I was wondering if the IRS has made this mandatory. I can't find any evidence that they have. I find language such as "allowed" or "can" in regards to applying losses against debt basis in the IRS publications. Thanks.
-
-
Perhaps dtlee can address this since he shared an extensive post on Drake software recently. -
If the shareholder's stock basis to zero, basis in debt is used to allow losses. Check IRC. 1367(b)(2)(B)
Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
Comment