Questions:
I know that allowable loss claimed on my 1040 is limited by my basis in the S-Corp; however, do I HAVE to claim the loss? If I don't claim any of it, does the full loss carry over to the next year or only the part that exceeds the allowable loss? Similarly, would my basis not be reduced if I don't claim the loss?
Details:
As TurboTax has had us fill out Form 7203 manually, I've used it to go back a few years to the beginning of my S corp (1 shareholder) to properly track my basis. In year 1, there were no capital contributions (stock basis = 0) but there was a net $600 open account debt. The year ended with a $5,000 ordinary business loss (no other losses/deductions). Form 7203, line 47 (d) "Allowable loss from debt basis" tells me that I can claim $600 loss on my 1040. But, for whatever reason, I DID NOT claim this $600 loss on my 1040. Year 2 was similar: increased debt basis, had S corp loss but did not claim any loss.
The instructions for line 47 (d) say, "line 47, can’t exceed the amount reported on line 29" which is the "debt basis before losses and deductions" ($600 in my case) but can it be less? Can I simply write $0 to reflect that I actually didn't claim a loss on my 1040? The answer to this question clearly affects my carryover for the next year (column e), my debt basis at the end of the year (line 31) and the future amount of nontaxable debt repayments (line 25).
Thank you
