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offset this years distribution beyond basis with prior years capital loss

Forum|Forum|3 years ago
April 18, 2022
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Am I correct in understanding that a large prior year's capital loss (long term) rolls forward at only $3K/yr unless there is current year long term capital gain that can be offset to a greater extent? And if so, does distributions beyond basis (S corp owner)(Ln 16D on K1) qualify as LT cap gain accordingly? If so, how do I make TT (desktop) calculate that properly? Currently it is not.

Thank you,

TurboTax Home & Biz Windows

Best answer by AliciaP1

This only qualifies if your K-1 is marked final because you sold all your shares in the S-Corp and no longer have any ownership. Otherwise it is a normal distribution and is not eligible to offset your LTCG.

@KL369

PatriciaV

Capital loss carryovers reported on Schedule D are included with your tax return until the loss is used up, either by reducing your taxable income or netted against capital gains. You can deduct up to $3,000 in capital losses each year ($1,500 if you're married filing separately).

The Capital Loss Carryover amount appears with Schedule D on the Capital Loss Carryover Worksheet, which is included when you print or save worksheets with your return.

Distributions in excess of basis are considered ordinary income and would not directly offset a capital loss carryover. Your total taxable income would be reduced by the allowable capital losses.

Capital Loss Carryovers in General:

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K

KL369Author

Thank you Patricia. But what about this from irs:

Important Things You Should Know:

A non-dividend distribution in excess of stock basis is taxed as a capital gain on the shareholder's personal return. It is a long-term capital gain (LTCG) if the S corporation stock has been held for longer than one year.

link: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-stock-and-debt-basis

AliciaP1Answer

This only qualifies if your K-1 is marked final because you sold all your shares in the S-Corp and no longer have any ownership. Otherwise it is a normal distribution and is not eligible to offset your LTCG.

@KL369

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