The S-Corp Stock Basis issue is not only a situation of losses, but an issue with the Code Section 179 write-off of up to $500,000 of equipment purchase, If the Corporation borrows $500,000 to purchase assets and then elects to write-off the full amount in order to reduce a $500,000 profit, then the Corporate bank account can be cash rich yet no tax profit in which to declare a dividend. A distribution then translates into a return of capital until exhausted and then a gain on the stock. At this point should the corporation have a loss, the shareholder has no stock basis to declare the loss as described in the article below. The S-Corp can not be managed solely by the bank balance.
We were just told that the house next to our office will be removed in the next two weeks. We realize this may cause a few days of parking congestion (more than normal). We had hoped to have had the house gone before tax season, but the schedule didn't work for the contractor. We apologize for any inconvenience this may cause.
It appears some S-Corp Owners (or an LLC tax as S-Corp) have an easier time getting some of their income treated as passive income (not subject to Self-employment tax) than others. If your business has substantial investment of capital as opposed to a service based business (Doctors, Attorneys and Accountants) where there is usually less capital and more service, then you could benefit from separating your capital investment earnings from your wages. Here is a very good article that helps determine where the lines are drawn. http://www.forbes.com/sites/procedurallytaxing/2017/01/20/plastic-surgeons-share-of-llc-income-not-subject-to-self-employment-tax/#6920b828749e
A few years ago two questions were added to all business returns and I believe some business owners still don't understand the importance of these two little question. The first ask "Did you make payments that would require 1099?" The second ask "If yes, did you issue them?" (are you going to comply). Keep in mind these questions become part of the income tax return that is being signed "under penalties of perjury". So, here we are in the heat of 1099 season and getting some businesses to issue these documents can be like pulling teeth. What every business owner should understand is the requirement of the tax accountant under Circular 230. We have Due Diligence requirements and can be fined if we knowing put false information on a tax return as well as banned from the e-file program. So, if you fail to provide the 1099 info and refuse to issue the required documents, then we have no option but to answer those two little questions as follows: 1) Did you make payments that require 1099? YES, 2) Are you going to comply? NO. If the return is signed with any other answer, I believe you have committed perjury. In our opinion, we believe this information will be used to select returns for audits. I hear people tell me all the time, "I don't want any RED FLAGS"! Then issue the 1099 forms!