Hi,
A passive loss is reported on your individual schedule K-1. Each year the passive losses incurred should flow through to each year's K-1, even if the if you hold onto the investment. After that, each shareholder will use their K-1s to show what part of the passive loss may be used on their 1040.
There won't be suspended passive losses at the S Corp level. I suggest reviewing the K-1s from prior years, it should have been reported on the K-1's from prior years. In the current year, when the investment is closed out, only the current year passive loss, as well as related gain/loss on the disposition of the investment would be reported on K-1 for the current tax year.
It is common for a S corp to provide a supplemental disposition report along with the schedule K-1. Inputting a investment sale inside an S corp to release prior year suspended losses requires an entire disposition of the S-corp itself, please reference this Tax Adviser Article:
Disposing Passive Activities
To report an investment sale inside a S corp & release prior year suspended losses, the disposition should be reported in box 10 of the K-1. This is important information that helps report the sale on Form 4797. The S-corp will report the sale on the K-1's. Suspended passive activity losses would then be tracked on Form 8582. Shareholders will use the information from their K-1 to complete their individual Form 8582's.
Great question regarding K-1's, here is an article regarding how to enter a K-1 in TurboTax:
TurboTax Where to enter a schedule K-1 that I received
