1120-US: Attribute amounts for S Corporations (FAQ)

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Question

How does UltraTax/1120 calculate the deemed net operating loss of S corporations?

Answer

Any shareholder loss or deduction that is disallowed for the taxable year of the discharge due to basis limitations is treated as a net operating loss of the S Corporation (deemed NOL). The deemed NOL is reduced by one dollar for each dollar of excluded canceled debt.

If the S Corporation has any excess deemed NOL after reduction, UltraTax CS will generate the Shareholder's Allocation of Excess Losses Per IRC 1.108-7(d)(2) Worksheet and allocate the excess proportionately to the shareholders. UltraTax CS then determines the appropriate loss amounts to carry forward for each shareholder on the Shareholder's Adjusted Disallowed Losses to Carryforward Worksheet.

Related topic: 1120-US: Form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness FAQs

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