surprise the 7203 doesn't work to limit losses. it merely info for the IRS so it can see what's supposed to be and what you did. Passive loss from an s-corp k-1 flows directly to the 8582 to determine allowed and suspended. losses. that has nothing to do with the 7203 which is a tax basis computation. even if a loss is suspended for PAL purposes it reduces tax basis. if you have losses in excess of tax basis that creates a more complicated entry requirement so that only the proper mount of loss is deducted through the 8582
