loss in excess of basis

[Bjorn]

A taxpayer has an s corp. He has loss in excess of basis of 60,000 being carried forward to 2007. If this entity shows a profit for next year can this loss offset the 2007 profits?

Mahalo
Bjorn

[JAinNC]

S Corp losses are not carried forward from 1120S to the next year's 1120S.
Jeannie

[Bees Knees]

A taxpayer has an s corp. He has loss in excess of basis of 60,000 being carried forward to 2007. If this entity shows a profit for next year can this loss offset the 2007 profits?

TTB, page 7-14 says, "Any loss that is not allowed for an activity under at-risk rules is treated as a deduction for that activity in the following tax year."

So lets say you have $60,000 of K-1, line 1 losses that were not allowed in 2006 due to lack of basis. The $60,000 is treated as if it were a K-1, line 1 loss in 2007. If the activity shows a $20,000 profit on line of of the K-1 for 2007, then you would report the $20,000 of profit on one line of the Schedule E, and on the next line show a $20,000 loss from that same activity, and carry the $40,000 difference over to 2008 as a K-1, line 1 loss.

[Joe Btfsplk]

Double check your tax software's handling of this

I had a similar situation involving numerous carryovers. My tax software did not handle them correctly and I had to get several trial versions of other programs to find one that would do it correctly. Tax Act, Pro Series and Lacerte all did it correctly. ATX and Drake did it incorrectly--but they may have improved in recent years.