Never-Ending Limitations on S Corporation Losses: The Slippery Slope of S Corporation Debt Guarantees

18 Pages Posted: 19 Dec 2003  

Francine J. Lipman

University of Nevada, Las Vegas - William S. Boyd School of Law

Abstract

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.

Keywords: S corporation loss limitations, shareholder debt guarantees

JEL Classification: K34

Suggested Citation

Lipman, Francine J., Never-Ending Limitations on S Corporation Losses: The Slippery Slope of S Corporation Debt Guarantees. Taxes - The Tax Magazine, Vol. 80, No. 6, pp. 29-36, June 2002. Available at SSRN: https://ssrn.com/abstract=479601

Francine J. Lipman (Contact Author)

University of Nevada, Las Vegas - William S. Boyd School of Law ( email )

4505 South Maryland Parkway
Box 451003
Las Vegas, NV 89154
United States

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