S-Corp Shareholder Basis Tracker · free, in your browser

Why an S corporation loss is suspended, and what frees it

An S corporation passes its loss to you, but you can deduct it only up to your basis: stock basis first, then the basis in loans you made to the company directly. What does not fit is suspended and carried forward. Repaying a loan whose basis was used up is where a later surprise comes from.

One invented example, three years

2024. You start with $20,000 of stock basis and lend the company $10,000. Your share of the loss is $40,000. It uses all $20,000 of stock basis and then the $10,000 of loan basis, so you deduct $30,000 and $10,000 is suspended. The loan is still owed to you at $10,000 but its basis is $0.

2025. Your share of income is $4,000. Income first restores the loan's reduced basis, then it absorbs the suspended loss, so $6,000 is still suspended at year end and the loan basis is back to $0.

2026. The company repays the $10,000 loan. With a basis of $0 the whole repayment is gain: $10,000 of gain (ordinary income if the loan is a note, capital gain if it is an open account), and the $6,000 loss is still suspended.

What to check

• Only money you put in yourself counts. A bank loan you guarantee does not raise your basis.
• Basis is tested at year end for losses, so a contribution made after year end counts for the next year, not the one that was limited.
• At-risk and passive-activity rules can limit a loss after basis does. The tracker does not model them.

Questions

Do suspended S corporation losses expire?

No. They carry forward indefinitely for as long as you hold stock, and become deductible in a year when your basis is increased enough to absorb them. Losses still suspended when your stock is sold or the company ends are generally lost.

Does a loan I made to the S corporation give me basis?

Only a direct loan from you to the company, at face value, gives debt basis. Guaranteeing a bank loan or lending through another entity generally does not. Ask a preparer how your loan is documented.

Why did repaying my shareholder loan create taxable income?

If losses already reduced the loan's basis, repaying it returns more cash than the basis you have left, and the reduced part is gain. Income in later years restores loan basis first, which is why the order matters.

Open the tracker and put your own K-1 figures through it. Nothing is uploaded. Related: the order basis is adjusted in and distributions over basis.