The owner of a closely-held business does not generally consider the tax implications when it is necessary to obtain financing for his business. A loan is negotiated and the borrowed funds are put to use by the business. However, in the case of a third-party loan to an S corporation,' different tax consequences may greet taxpayers conducting business as an S corporation, depending on the form of the loan transaction. Business owners adopting the S corporation form of doing business may discover that operating losses of the entity cannot be deducted due to the form of loan transactions between their corporation and third-party lenders. The purpose of this paper is to discuss the current state of the law with respect to a shareholder's ability to utilize entity-level indebtedness for the purpose of deducting S corporation losses currently.
Copple, Sumner E. III
"S Corporation Shareholders and Entity-Level Indebtedness: Is a Shareholder Ever Allowed to Deduct Losses Against Entity-Level Indebtedness?,"
Akron Tax Journal: Vol. 10
, Article 1.
Available at: https://ideaexchange.uakron.edu/akrontaxjournal/vol10/iss1/1