S Corp

[Strongsilence-CPA]

S Corp with multiple shareholders.   1 shareholder contributed personal assets, no others did.  In the following year, some of the assets were stolen.  Is there a tax law or basis for specially allocating the theft loss to the shareholder who contributed the assets?  

[IRonMaN · Accepted solution]

No, you have to stick to ownership percentages

[Strongsilence-CPA]

Agree.

[IRonMaN]

You have some room to play with partnerships, but not S corps.  But Bob will probably show up at some point with some deeply hidden tax provision saying that if you contributed a 1972 Firebird or a building that is exactly 20,000 square feet, you are allowed to allocate the loss to a specific shareholder 😀

[Accountant-Man]

First, how was the property contribution recorded?

Two, it was stolen from the company, not the 1 shareholder.

[Strongsilence-CPA]

First, how was the property contribution recorded?

Capital contribution to the SH, and assets recorded on the corporation books

Two, it was stolen from the company, not the 1 shareholder.

Agree.  There are police records that support that and the SH agrees.

[PATAX]

I would think that once the assets were contributed to the corporation that they then became assets of the corporation and therefore you would have to use the percentage ownership allocation like Iron Man said.

[Accountant-Man]

Right. So the loss is the corp's and must be part of the loss allocated to all SH's.

S corp's do not allow special allocations.