S-Corp Question

[avsdennis]

What is the name of your state? Georgia


We have 2 seperate S-corp companies. One has a net operating loss carry forward of about 3 million.

The other has become profitable at about $500k per year.

What can be done to combine/offset the NOL's of one S-Corp against the profits of the other S-Corp?

The stock of the two companies are not currently owned by the same shareholders.

 

[johannah11]

What is the name of your state? Georgia


We have 2 seperate S-corp companies. One has a net operating loss carry forward of about 3 million.

The other has become profitable at about $500k per year.

What can be done to combine/offset the NOL's of one S-Corp against the profits of the other S-Corp?

The stock of the two companies are not currently owned by the same shareholders.

This question raises some of the most complicated issues of tax law -- but the general answer is that there is probably not a lot of opportunity to use the losses of one to offset the others. There are several, very complicated Code provisions such as section 382 (which applies generally to limit the ability to use the losses of one corporation (whether an S or a C corporation) and section 1374 (which applies specifically to S corporations) and others that were enacted to specifically prevent such a result. Even if you were to merge the two corporations, these restrictions would apply.

You should consult a tax expert who can sit down and discuss you specific facts, because, while the general rule is that you likely can't use the losses of one corporation to offset the income of another, there may be specific factual situations where these provisions either would not apply or their impact is ameliorated.