S Corporation Shareholder - Components of Suspended Loss Carryover Worksheet

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This worksheet tracks the character of loss carryovers S corporation shareholders may have because of basis limitations.

When losses are suspended and carried forward, they retain their character and are treated as incurred in the following tax year. When the loss suspended for a tax year is less than the total loss incurred for that year (i.e. part of the loss was allowed and the loss consists of various items of loss and deduction), the rules state that the suspended amount should be allocated pro rata among the various items that make up the loss.

Under Regulation 1.1367-1(e), S corporation shareholders must reduce basis of non-deductible items before it is decreased by items of loss or deduction. However, a shareholder may elect to reduce basis by items of loss or deduction before non-deductible items. If the aggregate loss and non-deductible items exceed a shareholder’s basis, the shareholder will normally want to make the election.

Note: See IRC Section 1366(b) and Section 1366(d)(2) for S corporation losses.

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