Thanks again and apologies for confusion. I will be seeking outside advice.
This entity lost money for years due to interest expense and depreciation of the boat exceeding charter revenue. The last 1-2 years and 2019 finally show profits. So when there's a profit, I apply offsetting amount from suspended losses (with due diligence to basis/at risk) to have net zero effect via Schedule E.

So I'm thinking the only way to utilize the $400k suspended losses will be to create income of same amount.
Won't the sale of boat = a 1231 C.G? Perhaps I'm missing the point. It takes me a few times to comprehend!
Are you saying the sale of boat would result in business income and increase basis?

WAIT A SECOND! I think the lightbulb just went on!!
The 1231 C.G. would be a separately stated income item to increase the basis. With that basis, can use the suspended losses. However the almost $2M C.G. still flows to Form 1040.

Good question on who is doing the selling. Both are options; either sole shareholder selling the S Corp which has little value on the books. Or S Corp just selling all the assets.

BTW, this is only one of 3 entities undergoing this process. All in similar situation.
We won't go there.....