When you are a stockholder in a company -- LLC or subchapter S corp -- you prepare a K-1 for the owners in the firm, who each pay taxes on the passthrough incom

When you are a stockholder in a company -- LLC or subchapter S corp -- you prepare a K-1 for the owners in the firm, who each pay taxes on the passthrough income. In order to calculate personal tax due, the form includes the percentage ownership, which is also reported to the IRS. So the commenter is correct; I'm not sure why this wouldn't have been discovered earlier, unless he wasn't doing his taxes (even if there's a loss, taxes should be filed to claim carryover losses).