I believe you are referring to section 469 limits, which generally speaking limits the amount of losses, deductions, and credits that shareholders can claim from "passive activities". However, the passive activity limitations do not apply at the corporate level - they apply to each shareholder's share of corporate income and loss.
If an S Corporation does have a passive loss in any given year, it would be reported on that year's K-1 and there is specific information that needs to be reported on the Schedules K and K-1. Note that the S Corp would not hold onto those passive losses year after year; rather, each year the passive losses incurred should flow through to each year's K-1, even if the investment is still held by the S Corporation. Then, each shareholder will use their K-1 to determine what part of the passive loss may be utilized on their personal tax return.
As for your question on how to get TurboTax to release what sounds like suspended passive losses - there should not be suspended passive losses at the S Corp level. I would recommend you review your prior years' S Corporation returns and corresponding K-1's - each year that there was a passive loss at the S Corporation level, it should have been reported on the K-1's in those years. So, in the current year, when the investment is closed out, only the current year passive loss (and any corresponding gain/loss on the disposition of the investment) would be reported on the current year's K-1.
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