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Tax Law (Questions About Taxes)/How do I take deduction for money lost with S-Corp


I was a shareholder of 15% of a S-Corps. I put deposited personal money into business account to pay creditors and payroll. Business owner never creditors personal / business accounts. I have relinquished my shares as of Jan. 2013 there was no money exchanged.
I did not receive schedule relinquished for last yr, owners paperwork and books are a mess not in order at all.  I loaned money to purchase RV Trailer for company use to house employee in Oil Field purchased was made in cash $ 6,500.00 but title was put in CEO's name not the company December 2012. Verbally agreed to pay back at $1,000 month, now that I have relinquished all rights to repayment when I gave up my shares. Is this true? Can i deduct money i put into company and for creditors i paid for out of my personal account. I have received no reimbursement for either of these. Amounts totaling over $50,000 in last 2 yrs. We are in TX. if that makes a difference, I also have items I purchased for office use and personal office furniture they will not return or let me pick up.  Do I have any options???

Well let's start with the Shareholder part. What ever you paid for your 15% ownership would be a capital loss. But, you need to make sure that all the formalities were followed. Did you actually receive shares? Was there a record of the transaction. Did you then surrender those shares and do you have a receipt of that surrender?

If so your capital loss can be written off against comparable gains, or if there are no gains, it can be deducted against ordinary income at a rate of $3000 per year.

AS for the loan. . . (that is not the same money, right?) because if you got stock for the money it would not be a loan. It is also not a valid loan if there is not a "NOTE", an interest rate or an intent to repay. Verbal agreements don't hold.

Many people errantly believe that giving someone else some money hoping to get it back is a loan. According to the IRS that is not a loan that is a gift. It is only a loan if the proper formalities are followed.

Let's say there was a proper "Note" outlining the loan and the interest rate that will be paid and the rate of payments along with a term.

If you loaned the money on the trailer, did you record the lien on the trailer? If so that is collateral. If not. . .

If you can show it is a valid loan you could write it off as bad debt. (only get a tax reduction) but that would then be attributed to the business or the person as income and they'd have to pay taxes on it.


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Richard Fritzler


Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.


I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

National Small Business Owners Association.
Contributing author to "The Corporate Standard Newsletter".

Contributing author to "The Corporate Standard Newsletter".

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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