NOL & Negative Basis

[Max W]

I'm not sure I have this right.

In 2018, new client (S-corp K.1) had a NOL of $70K.    S-Corp Basis prior to this was $40K.  Since the loss exceeded the basis by $30K, that should have been reported as LTCG in 2018.

The $30K NOL carries forward to 2019.  Starting basis 2019  is 0.

 

[Abby Normal]

Basis can never be negative. The loss in excess of basis is a carryover loss, not LTCG and not NOL, either. NOL would be determined on the 1040.

Any distributions in excess of basis are LTCG.

[Max W]

On 7/10/2020 at 11:29 AM, Abby Normal said:

Basis can never be negative. The loss in excess of basis is a carryover loss, not LTCG and not NOL, either. NOL would be determined on the 1040.

Any distributions in excess of basis are LTCG.

Thanks for being the only one to answer and for setting me straight.