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.
