Attribution rules in regards to shareholder loans

[jskouberdis]

If the spouse of an S-Corp shareholder loans money to the S-Corp does that create basis for the shareholder to take S-Corp losses against.  Do the attribution rules kick in because the non shareholder spouse is deemed to own the stock that his wife owns because of attribution.

[PATAX]

@jskouberdis 👍 that is a great question that I would venture to bet most tax preparers would probably not know the definitive answer off hand... This is what you may want to do..  If you belong to any professional organizations that have a research department, you may want to call them... Also you could check your reference materials and manuals and books.. Finally try going on to the i r s website or another informative location or possibly a local colleague may have encountered a similar situation... Hope this helps...

[jskouberdis]

PATAX,

Thanks for your reply.  This seems to be an obscure topic.  I searched all over the internet and could not find anything and I talked to a few tax attorney's that I attend their seminars.  One attorney found something that said that loans by non shareholder spouses do not qualify for basis but he had to do a lot of digging.  I am just going to leave things as they are since no matter what I do it will wind up the same way.  The taxpayer will owe nothing because they are retirees and have no taxable income.  Instead of NOLCO they will have At Risk carryovers and not pay tax on the reduced basis loans.  The total loan is for $80,000 with a reduced basis of $25,000.  I don't think the IRS would come in and rearrange things and get no additional tax.  It would not be worth their time.  And compared to the high income people an $80,000 loan is very small.  And I think I have a case with attribution since the non shareholder spouse is president of the company and both spouses are deemed to own an equal amount of stock through attribution. 

Thanks for taking the time to reply

John Skouberdis 

[PATAX]

You're welcome.