Hi all,

I have an issue adjusting the allowable loss on a 2021 1040.

My client incurred a 120K loss on the 2021 1120S. Stock basis carryover from 2020 is 40K. He had 105K in PPP loans forgiven in 2021 which increased basis and took 100K in distributions which decreased basis. My understanding is that he's only allowed to take 45K in losses on the 1040 but when I bring over the K1 and check the some investment not at-risk box, it's allowing the full 105K PPP (other tax exempt income) as a deduction and carrying over the remaining balance. Any ideas as to how to properly adjust this?

Thanks