Video: S-Corporation Losses and Tax Deductions

   Learn Important Tax Issues around S-Corporation Deductions

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Video Transcript: S-Corporation Tax Write-Offs for Losses

Hi, I’m Chun Wong, a CPA and partner at Safe Harbor, LLP, a tax and audit firm based in San Francisco, California. Today’s topic is S-corporation tax write-offs for losses. S-Corporations have soared in popularity in recent years. They have become the entity of choice for doing business. S-Corporations do not pay tax on the corporate level, rather their income passes through to the shareholder, avoiding double taxation. Tax laws are extremely complex surrounding the ability to take S-Corporation losses. Three of these complexities are limitations due to basis and at-risk rules. Taxpayers must have both, basis and they must be at-risk. Basis begins by what you pay for the stock. It increase with earnings and capital contributions. The S-Corporation bases decreases with losses or distributions. Basis can also be increased by direct shareholder loans but, however, not by merely guaranteeing a bank loan. At-risk rules are horrendously complex. Since these rules were enacted over 30 years ago, there have been no final regulations issued by the IRS. At-risk in layman’s term basically means how much a person is on the hook for making a payment. Finally, passive losses aren’t deductible even if there is enough basis or you are at risk. Passive income arises from businesses that you do not work at or from rental income unless certain conditions are met. In summary, being able to take losses is a good reason to use an S-Corp as a choice of entity. Be sure that you can take all of your S-Corp losses and contact your local tax professional before year end for tax planning or by emailing us at

Video Target: Small Business Owners in San Francisco, CA

Business owners or anyone starting a small business, not only an S-corporation but a schedule C or C corporation, will benefit from this informative video on S-Corporation and write-off issues.