Creating loans between commonly owned S Corporations, where the loan funds are retained by the receiving S Corporation may create debt basis. The shareholders may be able to use such basis to deduct passthrough losses on their individual income tax returns. Taxpayers should avoid circular transactions.
This is a great idea and clients are always arguing sweat equity and non-taxable guaranteed compensation payments. It would be great to have an infographic that straight forward - yes you can do these, no you cannot take a W2 as a name partner in a partnership
