Tax News

CCH (cch.taxgroup.com) reports:

An individual was denied a deduction for suspended passive losses on his S corporation stock because the stock became worthless, resulting in a complete disposition of the passive activity, two years prior to the year asserted by the taxpayer. The taxpayer claimed that the stock became worthless in the year a lawsuit filed by the corporation was settled with no recovery for the corporation. However, the corporation became insolvent and the stock became worthless in a prior year since it had neither liquidated nor potential value. The corporation did not engage in any business activity subsequent to that year and there was insufficient evidence that there was a reasonable expectation the lawsuit would result in a substantial recovery allowing it to resume its business activities. Accordingly, any suspended passive losses under Code Sec. 469 were not available to offset the taxpayer's ordinary income in the year the lawsuit was settled.
A. Bilthouse, DC Ill., 2007-2 USTC ¶50,680
Other References:
Code Sec. 165
CCH Reference - 2007FED ¶10,001.103
CCH Reference - 2007FED ¶10,001.43
Code Sec. 469
CCH Reference - 2007FED ¶21,966.60
Code Sec. 1366
CCH Reference - 2007FED ¶32,084.425
Tax Research Consultant
CCH Reference - TRC SCORP: 410.05
CCH Reference - TRC STAGES: 9,176