Lesson: Pass-Through Loss Limitations

In this lesson, Nick Palazzolo, CPA, delves into the intricate world of pass-through loss limitations, especially how they apply to S-Corporations and partnerships. He emphasizes the importance of understanding these concepts, as they often feature in simulation questions on the exam and bear significant relevance in real-world applications. Nick demystifies the distinction between tax basis and at-risk basis limitations, explaining how they affect the deductibility of losses on individual tax returns. He also provides various examples and scenarios to clarify how these limitations work, including the implications for shareholders when losses exceed their respective bases and the handling of suspended losses in cases where an S-Corp is sold. This comprehensive overview offers clarity on the two critical aspects of S-Corp taxation, rendering what can often be a complex subject into digestible, applicable knowledge.