Interesting question.  I vote yes (there's only $500 federal tax involved, right?  Unless he was a student before joining the real world) but would the "gross income" test look at Line 22 of the 1120-S, or at Line 6, or at Line 3?  What if he were filing a Schedule C, that showed $50,000 of gross income (Line 7) but a $25,000 loss after $75,000 of Section 179 deductions?