Question

Schedule K-1 (Form 1120-S) - Loss Limitations

Accepted Answer

While the at-risk limitations are calculated on IRS Form 6198 At-Risk Limitations and the passive activity limitations are calculated on IRS Form 8582 Passive Activity Loss Limitations, there is not an IRS form for the potential limitations on the amount of corporate losses that you may deduct based on your basis in the corporation. You would need to enter only the loss allowed on Line 1 of Schedule K-1 (Form 1120-S), and then manually track the shareholder basis and the amount not allowed in the current year which could be carried forward to the time when the basis in the S Corporation allows the loss to be taken.

Per IRS Shareholder's Instructions for Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc.(For Shareholder's Use Only), on page 2:

Limitations on Losses, Deductions, and Credits

There are potential limitations on corporate losses that you can deduct on your return. These limitations and the order in which you must apply them are as follows: the basis limitations, the at-risk limitations, the passive activity limitations, and the excess business loss limitations. These limitations are discussed below.

To navigate to the Worksheet for Figuring a Shareholder's Stock Basis:

Online Navigation Instructions

From within your TaxAct Online return, click Print Center down the left to expand, then click Custom Print.
Check what you wish to print (the top section contains individual forms or schedules and the bottom section contains documents or worksheets). You may need to scroll down in the section to locate the items.
Click Print, then click the PDF link. Click the printer icon or the save icon (available when you hover your mouse over the PDF form) to print or save the PDF copy.

Note. If you see a message indicating you have not paid your return fees, click the View/Pay your return fees link, which will direct you through the Paper Filing steps. Continue through the screens until you have processed the payment for your product fees and then repeat the steps to print.

Desktop Navigation Instructions

Start your TaxAct Desktop program, then click Forms in the top left corner.
Click to expand the Federal folder, then click to expand the Worksheets folder.
Scroll down to the Schedule K-1 - Shareholder's Basis Worksheet section.
Select the specific Shareholder Stock Basis Worksheet needed.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.