Examining S-Corporation Losses and How They Are Used

Katherine Lim, Elena Patel and Molly Saunders-Scott

National Tax Journal, 2018, vol. 71, issue 4, 661-686

Abstract: Symmetric treatment of business losses would allow businesses in loss to claim an immediate tax refund. Instead, the U.S. tax system allows for businesses of all forms to use losses to offset positive income in other periods and the owners of pass-through businesses to offset current-year income from other sources. Little is known about how the losses of pass-throughs, including S corporations, are used. In this paper, we use administrative tax data to trace entity-level S-corporation losses through to their owners. We find that the owners of S corporations are able to use a large fraction of losses in the year that the loss occurs, ranging from a low of 49 percent in 2009 to a high of 68 percent in 2005. Because the lack of an immediate tax refund for losses can distort business decisions, that high current-year usage suggests that the tax treatment of losses may have less of a distortionary effect on the business and investment decisions of S corporations.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.17310/ntj.2018.4.04 (text/html)
Access is restricted to subscribers and members of the National Tax Association.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:71:y:2018:i:4:p:661-686

Access Statistics for this article

National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry

More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by The University of Chicago Press ().