topic Re: what happens to basis if an s corp is shutdown? in Get your taxes done using TurboTax

what happens to basis if an s corp is shutdown?

f404 — Tue, 24 Feb 2026 07:27:43 GMT

Hello tax pros,

If i have basis in an s corp (i funded it with my own cash) and it's been showing losses and I shut it down, can all of that basis be transferred to another s corp that i open the next year (for a new idea)? or is that basis lost forever?

thank you

f404

Re: what happens to basis if an s corp is shutdown?

Anonymous_ — Wed, 06 Sep 2023 14:36:44 GMT

I'm going to page @Rick19744 and @Mike9241, but losses in excess of basis are generally carried forward to subsequent tax years until there is basis.

However, if the corporation is terminated, the loss and items of deduction are permanently lost.

Re: what happens to basis if an s corp is shutdown?

Rick19744 — Wed, 06 Sep 2023 17:59:47 GMT

Stock Basis cannot be transferred.

If you have stock basis remaining after liquidating (shutting down) your S corporation, you have a recognized capital loss on that investment. This is reported on form 8949 and Schedule D.

Based on the limited facts, something doesn't seem right.

Not sure that you have tracked your stock basis correctly; just a thought.

Re: what happens to basis if an s corp is shutdown?

Mike9241 — Wed, 06 Sep 2023 16:32:45 GMT

Don't know how you could have losses in excess of tax basis if you are using cash method of accounting. Even with an accrual basis S-Corp that should not be possible because any unpaid debts are treated as forgiveness of indebtedness resulting in income

your basis should be zero - assuming you started the S-Corp from scratch rather than buying it out from someone in which case consult a tax pro.

all the cash you put into the S-Corp regardless of whether treat as capital contributions or loans from shareholder

less all the losses (net of any income items) the S-Corp incurred - limited to your tax basis

less all cash you took tax-free out of the S-Corp.

less the value of depreciable assets distributed: a) if worthless then in the final year show them sold for zero.

b) if FMV is greater than their tax basis the S-Corp is treated as selling those assets at fair market value resulting in income. The 1120S instructions say If appreciated property was distributed, attach a statement to provide the following information. us
• The date the property was acquired.
• The date the property was distributed.
• The property's FMV on the date of distribution.
• The corporation's basis in the property)

c) if FMV and their tax basis are the same use tax basis.

you can use IRS form 7203 to check this out but you must combine amounts for all years.

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if your reporting loss from the S-Corp on your 1040 form 7203 is a requirement.

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you can contribute any assets from the old to new S-Corp - could be a waste of time and money since there is no requirement to start a new S-Corp even with a new business - however, maybe from a legal standpoint, a new S-corp would be protected against any outstanding liabilities of the old one. if you do start a new S-Corp and contribute the old assets their basis is your basis from the old s-Corp. the tax basis of any other assets contributed is the lower of your cost or Fair Market Value.

Re: what happens to basis if an s corp is shutdown?

Rick19744 — Wed, 06 Sep 2023 18:08:37 GMT

To clarify a point:

If upon liquidation of old S corp there were assets distributed, those were distributed out at FMV and reported on form 1099-DIV.
There was a true (recognized) gain or loss on this event.
As a result, if those same assets were then contributed to a new S corp, their basis is FMV (not adjusted basis from the old S corp).