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.