Can S-Corp passthrough beginning basis be adjusted for errors in py calculation of basis in cy to allow use of py loss? Or should we file amended returns?

[alsjones]

Can I correct a S-Corporation beginning basis in the current year that will allow a carry forward loss to be used? It was discovered that over the last several years the taxpayer gave money to the S-Corporation (or paid bills directly) that was not previously reported. Or do I have to file amended returns for the years in payments were made?

[TaxMonkey · Accepted solution]

You cannot take losses that should have been included in prior years in the current year.  You can calculate the current year basis correctly - as if all contributions and losses had been properly take and use that as your cy basis.  Since you state that basis would be zero, that is your answer.  The only way to access the previous losses is to amend for those years.

[alsjones]

Thank you!

[PhoebeRoberts]

Agreed!

[PhoebeRoberts]

Basis isn't a tax return item. You calculate beginning basis as if all prior returns had been prepared correctly (which might mean that losses would have been allowed in those prior years, so current year basis is still starting from zero), with the caveat that double-dipping isn't permissible. No amendments required in order to correct beginning basis in the current year. You could disclose on an 8275 if you were so inclined.

[alsjones]

Thank you for your quick response.  Sorry if this is a duplicate, not sure the first comment went through.  This is for a S-Corp passthrough with a loss carry forward that has been limited by basis and so the basis schedule is included as a statement on the tax return.  I agree that beginning basis in the cy would be 0 if the payments had been properly reported in their perspective years.  However, they were not and therefore there would have been losses allowed in prior years that were not taken because the additional amounts invested were not reported.   There's no intent to double-dip but could the payments made in prior years and not reported be included in the basis calculation during the current year?  Or should amended returns be filed to claim the losses allowed in the years the payments were made?   

[PhoebeRoberts]

Gotta amend, sorry! 🙂