Tax Year Prior to 2020: Loss Carryover from the sale of a business property

[toddcrab]

I want to make sure I understand how a projected loss on the sale of a business property will effect my tax return if the loss exceeds my income for the current year.  My question is copied below the example.

Simplified Example:

I own an S-Corp (100%) and receive a K-1.  My business sells a property at a loss, and a loss of -$100K is passed through and recorded on Form 4797 and line 14 of my 1040 (2017-version of the 1040).  Let's say I have $40K in W2 income and $40K in S-Corp income.  Therefore my total income (40+40-100) is negative -$20K.

Question: Does that negative -$20K simply carryover onto the next year's tax return, thus reducing next year's income?  And will Turbotax remember to apply that loss to my following year's tax return? (I use TT every year.)

I ask because I've read that when you sell stocks at a loss only a $3K/year portion can be used to reduce income until the loss is fully absorbed.  Are there any similar restrictions on how these type of losses are carried-over?

[KarenL]

It will be a capital loss that carries from the K-1 to your personal tax return.  It will "net" with other capital gain/loss that you have on your personal return.  And, yes, it is limited to the $3k current year "net" loss.  

TurboTax does track this, however, you will definitely want to print the worksheets and keep records to track yourself.  

[PRAY58]

A couple of factors to consider:

1.  What type of asset is sold?  Does the asset qualify for Section 1231 treatment?

2.  Does the taxpayer/100% owner of S-Corp shares materially participate in the business?

If yes the loss may offset against ordinary income rather than capital gains income (subject to the $3,00 loss limit).