Hello,
I am trying to understand the interplay between passive activity loss rules and basis limitation rules.
The S corp in which I am a shareholder has a passive real estate activity which generates a loss year after year which is reported in Box 2 of my K-1.
In my individual tax returns, I have always carried these losses forward on Form 8582 (Passive Activity Loss Limitations).
Now comes along Form 7203 (S corp Shareholder Stock and Debt Basis Limitations) . Let's assume that my K-1 has a negative entry (i.e. loss) in Box 2 for the current tax year. Do I make an entry on Line 36 in Part III of this form (7203) or leave it blank? Please explain.
Is the following statement true? If a shareholder cannot take advantage of Passive Losses in his individual tax return for a given year, those losses should NOT decrease his Basis in the S-corp.
Thanks.
