Never-Ending Limitations on S Corporation Losses: The Slippery Slope of S Corporation Debt Guarantees
Francine J. Lipman
University of Nevada, Las Vegas - William S. Boyd School of Law
Taxes - The Tax Magazine, Vol. 80, No. 6, pp. 29-36, June 2002
The amount of S corporation entity level net operating losses that are allowed to pass through to S corporation shareholders is limited. Shareholders may increase these limits by properly structuring their debt especially shareholder guarantees of S corporation debt. This article focuses on critical shareholder missteps in the recent Tax Court and Seventh Circuit Court of Appeals cases of T.F. Grojean. Because of inadequate tax planning the Grojeans' S corporation pass-through losses were not allowed. The article concludes with a summary of lessons S corporation shareholders can learn from the Grojeans' missteps.
Number of Pages in PDF File: 18
Keywords: S corporation loss limitations, shareholder debt guarantees
JEL Classification: K34Accepted Paper Series
Date posted: December 19, 2003
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