Question
Cancellation of debt for an S corporation
I have an S Corporation that received a 1099-C for about $500k. We can exclude $200k since their liabilities exceed their assets. How do I reduce the tax attributes of the S corporation?
They have an ordinary loss of $50k in the same year, they have a carryover of disallowed sec. 179 deduction of about $16k, and shareholder has about $80k in suspended losses that were limited by basis.
I am pretty sure all of these tax attributes (total $186) would be reduced to zero since we excluded $200k from the 1099-C. Are they limited at the S corporate level or at the shareholder level? And how would this be entered into Lacerte.
I would appreciate any guidance.
Thank you.
