Closed C-Corp losses to owner's personal returns

[kpangelinan]

If a C-Corp is closed and has a large loss, can that loss flow onto the shareholder's personal returns as a business loss?

[les grans]

The corporation's tax loss is certainly *not* deductible by the shareholder. However, where did the corporation get the money to incur the losses? If the money came from the shareholder, that shareholder may have a tax loss - outside the corporation - that is deductible, one way or another...

[kpangelinan]

Hey thanks for the information.....all of the money invested in the company was put in by the only shareholder/owner. How is this deducted on their personal returns? Thanks,

[Bees Knees]

all of the money invested in the company was put in by the only shareholder/owner. How is this deducted on their personal returns? Thanks,

When a corporation liquidates, the shareholder has a capital gain or capital loss on the difference between the fair market value of things he got out of the corporation, verses things he put into the corporation.

Example: Shareholder puts $100 into a corporation. Corporation takes out a loan for $1,000. Corporation spends $1,100 on business deductions and generates no income. Corporation shows a $1,100 net operating loss. Corporation goes belly up. Corporation has zero cash to give back to shareholder upon liquidation. Shareholder shows a $100 capital loss on Schedule D of his 1040.

Since the corporation was liable for the $1,000 loan and not the shareholder, the shareholder gets no benefit for that portion of the NOL. If, on the other hand, the shareholder has to pay the $1,000 back to the loan company because he personally guaranteed the loan to the corporation, then the shareholder can deduct that $1,000 as a capital loss on Schedule D, provided he actually pays the money back to the loan company.

The shareholder can only deduct what he actually put into the corporation.