New Jersey Statutes Title 54A. New Jersey Gross Income Tax Act 54A § 5-12

a. The aggregate amount of losses or deductions of an S corporation taken into account by a shareholder of the S corporation for a taxable period pursuant to section 11 of P.L.1993, c. 173 (C. 54A:5-9), shall not exceed the shareholder's combined adjusted basis, determined in accordance with section 13 of P.L.1993, c. 173 (C. 54A:5-11), in the stock of the S corporation and any indebtedness of the S corporation to the shareholder.

b. Any loss or deduction of an S corporation which is disallowed for a taxable period pursuant to subsection a. of this section shall not be treated as incurred by the corporation in any succeeding taxable period with respect to that shareholder.