Taking a loss on S Corp in Schedule K1

[kevin_ny_2003]

Is there any regulation on taking losses on S Corp after you subtract you expenses from the income?

I took loss in the 2nd year of business but wanted to make sure if it is OK to take loss in another year ?

My S Corp was profitable in last  5 years consecutive years but I took a hit last year.

Turbo Tax for business is showing a negative amount in box 1 of Schedule K1 which I need to transfer to my personal tax on Turbo tax permier. 

In case of taking losses are you supposed to close the company ?

Thanks

Kevin

[tagteam · Accepted solution]

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@kevin_ny_2003 wrote:

In case of taking losses are you supposed to close the company ?

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No, it is not unusual for a business entity to incur a net loss periodically (or even somewhat regularly) and you do not have to close the company as a result of a net loss incurred over one tax year.

[DavidS127]

The only restriction on deducting losses is that your loss deduction for your S Corp can't exceed your basis in the S Corp.  Basis is the "net" money you have in the S Corp, for example "your original investment plus any additional investment you put in since then plus money you loaned the S Corp plus net income earned by the S Corp minus net losses minus distributions to you from the S Corp".  That example is a bit simplistic; see this IRS website for more information on S Corp basis.  And, you can get a lot of details if you click the "Learn More" link on the box 1 screen for your K-1 entries: