Private company services – IRS guidance addresses treatment of disallowed losses associated with certain S corporation distributions

July 2014

Overview

In a recent Chief Counsel Advice memorandum (CCA 201421015), the IRS concluded that S corporation losses disallowed under Section 311(a) reduce both the shareholders’ basis in the S corporation stock and the S corporation’s accumulated adjustments account (AAA). S corporations contemplating a distribution of loss property should consider the impact of the IRS’s conclusion.

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